The Australian property market has proven to be highly resilient. In Australia, most property is sold ‘Freehold’, which means that when you purchase a property, you also purchase the land on which the property stands. Even when you purchase an apartment, you still own a portion of the land.
Another type of ownership is called Leasehold. It is not as common in residential real estate in Australia, and it is where a lease is granted to live and use a piece of land. Typically it is for an extended period, such as 50 years.
There is more to property investment than just purchasing a block of land. Every city and suburb has unique factors contributing to supply and demand. So it is vital to understand who is living in the area, what makes them stay for the long term, and the average rental yield and vacancy rates.
Real estate investing is a big decision, so do your research and only move ahead with property investment in a market you have researched and are familiar with. For interstate or overseas purchasers, you may consider even hiring a buyer’s agent to work independently for you.
Know What You Want
As a property investor, the first step of finding a good investment is to plan what you want to achieve; your financial goals. For most, the decision to invest is made because you would like to make a profit. But are you looking for long-term gains in the form of capital growth potential, or do you require more immediate results such as a high rental return?
Chances are, what you want to achieve will be a combination of both. Understanding these two different aspects of your investment will help you set goals and clarity about what you want to achieve from your investment.
For example, if your strategy is for a high rental return, you will generally look for a location that renters favour, with high demand and low supply.
Suppose your strategy is to maximise Capital Gain. In that case, you may look at areas around emerging or established amenities and infrastructure that will continue to make it a desirable location and are primed for growth. For example, Educational hubs, Health Care precincts, or a site with proximity to several pillars that will draw people to the area.
Your investment strategy will play a role in selecting a suitable location for your property.
Many investors look to property investment as a form of passive income. Putting the work in early to choose a property that is the right fit for your budget and goals and understanding all your costs can be beneficial to your cash flow and maximise outcomes in the long run.
Location Is Permanent
Location is one of the most influential driving forces behind the value of your property. You can renovate, remodel or rebuild the property, but the one thing you cannot change is the location of the land.
The ideal location varies depending on a property investors goals, budget and strategy. There is not one perfect location that suits everyone.
Being familiar with the pros and cons of an area and doing your research into supply, demand, demographics and historical performance can help you make an informed decision.
Consider Supply And Demand
In a given area, rental availability determines the supply and demand for rental properties. An oversupply can result in a lower rental yield, as there is more rental availability than renters. Tight or under-supply generally leads to an increased rental yield.
Broadly speaking, a vacancy rate of 3% is considered a balanced market. Over 3% vacancy rate means a competitive supply of rental properties. Less than a 3% vacancy rate means limited availability of rental properties.
The vacancy rate won’t only contribute to your rental yield but will also factor in how long your investment remains vacant between tenants.
Demographics
Knowing the demographics of your intended location is an important consideration so that your investment property appeals to potential tenants in a location. It will indicate what kind of tenants live within the town or suburb and how they live. Family homes or apartments? Demographic factors typically shape the type of residence in demand include age and employment type of an area.
The Bigger Picture
When selecting a location, consider the amenities available in that area and any proposed changes to improve the local infrastructure and service.
Having proximity to schools, employment precincts, and recreational facilities such as a park is ideal for residential properties. Transportation may also be a factor you want to consider, including access to public transport and suitable road infrastructure for private vehicles.
Legal Obligations Of Landlords
If letting a property, an investor must comply with any relevant legislation. A good Property Manager will assist you in navigating your legal obligations and avoiding legal problems in the future.
Researching and understanding the market will make your investment choice less intimidating. Location is subjective to each investor and what you are looking to achieve, so you are confident when you find an investment property that presents value in the market and meets your criteria.
If you are looking to purchase your first investment property or build your portfolio, book a free assessment with our team to understand your potential loan options, full costs of purchase and how much you may be able to borrow.
Disclaimer:
Terms are subject to approved persons only. This information is true and correct as of 5/02/2022. All of the content above is general in nature and may not suit your personal needs, situation objective & goals.
