3 Tips When Looking For An Investment Property
When buying an investment property, it’s all about how easily you can find and secure a profitable property. Here are 3 quick to the point Tips to help you invest well:
1. DON’T LISTEN TO YOUR PARENTS!
Have we got your attention? We don’t mean this literally. Just don’t listen to ’advice’ from well-meaning family members and friends who do not have the results that you want for yourself. Often these people tell you what to buy and where to buy, such as “only buy houses” or they say things like “you should only buy near where you live”. Successful investors know to follow real statistic and research backed facts to invest, rather than personal opinions of others. Best practice for investing is first to decide the kind of profit you are looking for and choose the property you invest into based on what is most in demand in a particular area, rather than your personal preference. For example, if a particular area’s population is made up from mainly singles and couples with no kids, then perhaps 2 bedroom apartments would be the best choice of investment for that area (you can get demographic information from the Census or council websites).
2. CHECK THE YIELDS
To be a profitable property investor strong rental return is important. The rental return will make the property affordable to hold on to. A good rental can even give you passive income each month after all costs, this is called positive gearing. A good rental should be about 5%pa or more, thus if a property is worth $500K, you want to get at least $500 per week or more, if it's worth $300K, then you want $300 per week or more etc. Some property prices such as Sydney’s have moved so much that the rents have not been able to catch up, thus the returns are low in comparison to the property’s value.
3. CHECK VACANCY RATES
Vacancy in rental property can put a real strain on an investor’s cash flow because they will need to pay for the loan on the property without the assistance of rental coming in from a paying tenant. A way to help reduce this risk is by checking the vacancy rates in an area. You can do this by going to www.sqmresearch.com.au. A balanced market has a vacancy rate of 3%, however, a market where there is a shortage of supply of property will have a vacancy rate below 3%. When vacancy rates are below 3%, this represents a high demand in the area and shows potential for both growth in the short to medium term, and also the likelihood of the property renting out swiftly. Be careful to check the recent vacancy rate history of the area to have a more thorough understanding of whether the vacancy rates are trending upwards or downwards in that area.