Entering the investment property market

Purchasing a property for investment purposes can involve a different set of considerations compared to purchasing a family home. Here are some tips to get you started.

Which rental market?

First, you need to decide if your property will cater for the budget rental market, mid-level rentals or the executive market. Will you manage the property yourself or use a managing agent? While the “executive” end of the rental market provides very good returns, it is probably not suitable for the average investor.  The
market for high rent properties is fickle and, in the event of a market downturn, you could find yourself without a tenant for a considerable period and no cash flow to meet mortgage repayments. At the budget end you are more likely to encounter higher tenant turnover.

What type of tenant?

Consider the type of tenant you intend to target.  Are you looking for young couples with no families or will you target the family market?  Units are good for business couples, while the typical house and garden is more suitable for families.  In the latter case you need to be sure it is close to schools, childcare facilities and sporting amenities.  Avoid swimming pools like the plague!  Not many tenants will properly care for a pool when they don’t own it.

To minimise tenancy turnover and appeal to the higher calibre tenant, the property should be finished and presented to a standard that is more applicable to an owner-occupier.  A relatively new or recently refurbished property, well decorated, with reasonable quality fixtures and fittings is important to secure the right tenant who will stay for the longer term. 

Location, location, location

Once you have determined the type of property, the next step is location.  A more attractive rental property will be close to public transport and good road systems.  Consider if there are high levels of employment in the close vicinity, such as industrial or commercial centres attracting substantial numbers of employees -
and potential tenants.  What is the level of rental vacancies in the selected district?  A check with local real estate agents will answer some of these questions.

For long-term capital growth you need to seek an area with high trends in population growth. Take some time to study which areas are proving popular and where local authorities are developing infrastructure. 

Do it yourself or use an agent?

Happy, contented tenants will look after your property, so good property management is essential.  If you intend to do this yourself, be sure you can be contacted at almost any time in the event of emergencies and have a list of tradesmen you can call for plumbing, electrical or building problems.  If you intend to use a
managing agent, check their background, experience and current management procedures.  And shop around.

Remember, to improve your chances of profit, property should be considered a long-term investment. With this in mind, it is worth putting in the extra legwork before you buy to help make a good investment decision.

KK’s gut instinct

I’m still bullish on property in and around Maidstone, Kingsville and like suburbs just West of the Maribynong River. Excellent opportunities still exist.

Western Australia is on the verge of a boom that will make Bill Gates feel impoverished.

Sporting tip of the month

Federer will win French Open and I must eat humble pie, as Essendon are on fire and certainly won’t finish second last as I predicted earlier this year.

Call me with your thoughts on this or post a comment below!