If you’re looking to purchase a property for investment purposes, it’s important that you think with your head and not your heart.
Buying a home for you to live in means you’re able to implement changes to reflect your individual personality, wants and needs. You can weigh up your lifestyle choices and inject flavour, colour and everything you need for you, to make the house a home.
When it comes to an investment opportunity though, these heart-driven decisions are taken out of the equation. Renovations are made with the market and buyer in mind, location and price become more of a priority and desired features are replaced with ‘must-haves’ to get the best possible return. It doesn’t mean to say you can’t have a little fun with your investment. But in order to invest smartly, shifting your focus to what potential tenants want – as opposed to what you want – is vital.
Great property investments have many attractions for first-time buyers. The potential to grow a wealthy portfolio is very real. Many buyers are guided by their emotions, but the property route is very different when deciding to buy an ‘investment’ rather than a ‘home’. And as with any big investment, you need to be armed with information before you dive in with your money!
Here are some essential considerations to make when buying for investment purposes:
Location, Location, Location!
Location is everything! Whilst it’s an important consideration whether you’re buying to invest or to live in, location is key to how successful the property can be. Tenants want to rent in suburbs that are close to the essentials. Distance to the CBD, transport links, schools, amenities and all the lifestyle attractions must come into the equation. This is where demand is high and thus, achieves the best rental yield.
Look at locations that have planned developments and infrastructure too. This shows that the area is growing, which will bring in future lifestyle and career opportunities, further increasing housing demand. The location you choose to invest in has the power to attract or deter tenants, so research into the surrounding neighbourhoods beforehand to gauge whether or not it’s a good investment opportunity. Safety and crime rates will play a huge role too.
Finding a ‘Pretty Property’
Properties that look and feel the part will naturally do better than those that appear to have been abandoned for the last 12 months. We all want to live in a great-looking home – whether you’re renting or you own the home you live in – so appearances do count. Finding a ‘pretty’ property isn’t just what you may find attractive though, especially when you’re buying an investment vs. buying to live. Property type, appearance and the quality of the build and everything in it all come into play.
Remember, what makes a property pretty to you may not be what your tenants are after. Thus, it’s crucial to stick to the home-buying essentials when keeping tenants’ wants and needs in mind. A few of these can include:
- Open Floor Plan: We hear it all the time for a reason – renters love it. Open plan living make small spaces feel larger and that feeling of space is a huge selling point in any property. Interior layout can have a big impact on your lifestyle. Make sure the property is easy to navigate without narrow passages or sharp corners. Homes that have a better natural flow will always be easier to rent out.
- Indoor-Outdoor Flow: Aussies crave that outdoor living lifestyle, so properties that can effectively facilitate flow between the two worlds will be in higher demand. An outdoor entertaining area, sliding glass doors to merge the indoor-outdoor zones together and adequate shelter are all key selling/buying points in a property.
- Quality Kitchen: It’s the hub of the home for a reason. Make sure your investment property has a modern kitchen with energy-efficient appliances, storage space and plenty of cooking/counter space.
- Available Parking: Tenants (and homeowners) want to know the property has enough parking. Think street parking, wide driveways or a good garage space. If parking is a mission, the property isn’t practical or pretty.
- Heating and Cooling: What used to be a luxury is almost a given in properties nowadays. Living (and investing) in Australia calls for central heating and cooling, or the property down the street is probably going to get rented out first.
- Natural Light: No one wants to live in a dark, dingy cave. Something as simple as installing a skylight into a hallway, bathroom or kitchen space can go a long way in changing the look and feel of a space.
- Kerb Appeal: Properties which are well-maintained and easy to look after have the biggest appeal. Tenants aren’t going to spend much time looking after a property they don’t own, so invest in a property that has an easy-to-maintain front yard. Easy care greenery, a new mailbox, colourful landscapes and edged lawns help the property to look tidy and inviting and give it a visual appeal which attracts tenant/buyer attention and can do wonders for how your property is perceived, helping it to stand out from its competition.
Renovating for Investment Purposes vs. Renovating for YOU
The most important thing when renovating for investment purposes is to not over-capitalise. As opposed to renovating your own home, where you can invest as much money as you desire and include your own stamp of individuality, investment renovations are for one reason only – to make money.
Emotion and comfort-based decisions are taken out, while you focus purely on the financial returns. And that means sticking to essential improvements which will get your investment property over the line with budget and time factor in mind.
For example: If you’ve purchased a $400,000 investment property, you wouldn’t want to spend more than $20,000 on renovations. Make sure these improvements can squeeze into a month’s timeframe too – the longer it takes to renovate, the longer you’ll be without a tenant or income.
If it were your own home, you’d probably install high-quality fittings and appliances. Investment properties, on the other hand, won’t have top-of-the-range fittings. Focus solely on the items which bring in a higher rental return, such as fresh paint, up-to-date kitchens and bathrooms, security screens, floor coverings, window dressings and privacy and fencing in the outdoor areas.
You want to add value, without investing in a full fixer-upper. Be prepared to look for cost-effective solutions with your investment property but be careful not to go too budget. This is where repairs and maintenance can get costly down the track.
About the Author
This article is written by Jayde Ferguson, who writes for Momentum Wealth. Offering market leading research and advice on the Australian property market, the company helps clients accelerate their wealth through property investment by assisting them in the strategic planning, financing, acquisition, management and development of their commercial and residential investment properties. Catch Jayde on Google+.