Choosing an investment property

It’s a little easier to be rational about buying an investment property than buying a home. Since you don’t plan to live in it, you can inspect places with a more business-like eye.

The location

If you’re looking for a place with potential for capital growth, the experts reckon you should aim for place close to the CBD, because scarcity and demand will ultimately push the prices up.

If you’re looking for a good rental return and a steady cash flow consider buying in the suburbs or regional centres. Prices in these areas are cheaper so you’ll get a better rental yield.

Whatever the investment strategy you follow, there are some general things to keep in mind when deciding where to buy:

• Try to avoid places on busy roads or directly under flight paths.
• Waterside suburbs appeal to both renters and future buyers and they tend to at least hold their value.
• You don’t have to buy somewhere close to where you live.

Unsurprisingly, making a successful investment in property means buying the right place, at the right price, at the right time. So when you’ve narrowed down the locations you’re interested in, research the state of the property market in those areas. Keep an eye on vacancy rates, sales prices and rental rates. Look at the interest in the area, the current population growth and the projected population growth.

There are lots of websites out there to help you keep up to date with property market statistics. Take a look at the price mapping tool on ninemsn’s Money site.

The type of property

Residential? Commercial? Or even a holiday rental? There are many of types of property to consider, but most Australians opt to invest in residential property because that’s the type they know best.

If you decide to go residential you’ll need to decide between a unit or house.

The plus points with a unit include:

• They tend to be cheaper and therefore provide a higher yield.
• The upkeep is managed by a strata company and if things go wrong the cost is split between all the strata owners.
• If you do decide to purchase a unit make sure you check the strata fees and council rates when doing the sums.

If you invest in a house:

• The extra land value can provide a greater chance for capital growth.
• There is good chance of finding a tenant as there are lots of families interested in having some extra room for the kids.

If you do decide to buy a house, be aware it can be a pain to maintain.

The features that will appeal to tenants

When looking at a property, put yourself in the shoes of your potential tenants. Think about what sort of people the place will appeal to most. The sorts of things a family will look for will be quite different to what a professional couple will be interested in.

For example, a family is likely to be interested in things like the property’s proximity to schools and the quality of its kitchen, while a professional couple might want to know about nearby cafes and the distance to a convenience store.

Some features will appeal across the board. Look out for places with balconies, internal laundries and parking.

To find out what is popular in the area you are looking at, talk to local rental agents and ask them about the types of properties in demand.

The past history

Before you enter into negotiations for any place, find out if it was rented in the past: how much it was rented for, if there were any vacancy periods, how long it was vacant for, and why.

Continue to information about choosing an investment loan.