Smart Property Investing

Feb 23, 2023

You’re thinking about investing in property, but what makes for a smart investment? What should you consider when buying property for financial gain? In this blog, we will take you through some of the common appeals to tenants when they are seeking a home, as well as other factors to consider when buying for investment.

Capital Growth & Rental Yield

If you are investing in property, you are seeking financial gain through either rental yield (generating a passive income) or capital gains (achieving a profit at point of sale), or both. When looking at the potential for future gains, do your research on the capital growth of the area, including trends, demand, median sale prices etc.

Rental yield is the calculation of rental income versus the costs of ownership and maintenance outgoings (for example, mortgage repayments, strata fees, council fees, repairs, etc.). As an example for factors to consider when determining rental yield, it is important to do your research on vacancy rates in the area, median weekly rent, potential growth rate and property types that are in demand by tenants in the area.

Location

It’s the age-old real estate saying ‘location, location, location!’ that still rings true in smart property investment. What appeals does the area have to potential tenants? Amenities, convenience to public transport, access to schools, community, local business and other facilities are all criteria to be considered.

Property Features

Does the property have any features that may set it apart from other options in a tough market? Does it have parking space? How is the street appeal? Perhaps a home office is important to those living in the area? It is important to consider how your investment would fare in highs and lows of the rental market – both in terms of rental yield calculations, as well as how your property will generate demand. The age of the property will impact your property depreciation schedule, and any renovations required would need to be factored into your budget and consideration given to if it will increase the value of the property over time.

Property Type

Is the area you are looking in in high demand with large families? Or are young couples more attracted to this location? This will play a part in what type of property will be most sought out – perhaps a 1 bedroom apartment would be a more suitable investment – or it may be an ineffective option, with a 4 bedroom house yielding a higher demand.

Financial gain through property investment is a process, so it pays to be smart and build strategy around your portfolio. We recommend speaking with a financial planner who can help ensure your investment selection is suitable for you and your goals.