Where to Invest and Where You Can Skimp in the Current Property Market

In today’s property market, where prices are inflated and competition is fierce, it’s more important than ever for investors to understand where to spend and where to save when it comes to real estate. The key isn’t just finding a suitable property; it’s doing your homework and choosing one that will give you a real return on your investment and knowing what improvements to undertake to make it more appealing to renters without overcapitalising.
If a house has good bones and is in a desirable area you might want to skip a full-scale renovation and focus on cosmetic upgrades, such as a fresh coat of paint, updated fixtures and a good clean. An outdated bathroom or kitchen isn’t necessarily a deal breaker for potential renters if the location is right.
Location
It may sound like a cliche, but when it comes to property investment, location is everything! Properties with access to reliable public transport, and proximity to schools and other important amenities attract more tenants. They are also more likely to achieve higher capital growth and rental yield. Don’t forget to look at the history of the home with respect to past weather events to determine whether it’s likely to succumb to future damage or if it can be weather proofed with a few minor renovations.
There are three main factors that drive market demand in specific locations; economic activity, local entertainment, and the suburb’s reputation. People are drawn to areas that can offer them good job prospects, a vibrant lifestyle, and a sense of prestige.
Investers should also consider rental vacancy rates, demographic trends and planned infrastructure for the area.
Rental Returns
A rental return is simply the income you make renting out a property compared to how much the property is worth. This helps you assess if the property will be profitable, break even or become a money pit.
- Sum up the total rent you would charge a tenant annually
- Divide that by the value of the property
- Times that figure by 100 to get the percentage
Typically, a good rental return is around 5% and is largely impacted by the location since this determines rental price and other aspects of the property’s value.
Building Inspectors
Buying the ‘worst house on the best street’ can be a clever strategy for property investment but it also calls for the attention of a highly reputable building inspector. This is not the place to skimp and save! A quality building inspector may cost an extra few hundred dollars now, but they can identify structural or termite damage, or botched renos that could cost you hundreds of thousands of dollars down the track.