Looking to purchase a property to boost your investment portfolio and achieve profitable returns? Investment properties can be very rewarding if done the right way. It is especially important to carry out detailed research before you dive head first into investing. Ensuring you are on top of all the pros and cons of investing in a property will save you in the long run. To ease your concerns and narrow down your options, here are some key things to consider when buying an investment property.
Potential Growth In The Neighbourhood
Having in-depth knowledge about the ins and outs of the neighbourhood is crucial in determining long-term success for your investment. Doing plenty of research in finding out different aspects of the neighbourhood’s development plans and any significant changes that have occurred in the past will give you a good indication of the location’s overall value in the property market.
Take some time to look at what’s happening in the area from a wide perspective and ask yourself: Will there be great potential for development? Is there a substantial increase in population? Have the neighbouring areas experienced any capital growth? Better yet, go the extra mile to find out if any infrastructure improvements are on the horizon. These indicators will act as a valuable checklist that will gear you towards picking the right property.
It is also wise to look out for locations that tenants favour, instead of just what looks ideal to you. If the goal of your investment property is to earn a strong, consistent rental income and effectively minimise vacancy, then opting to invest in locations that benefit tenants’ lifestyle and providing them utmost convenience is a must.
Strong Rental Returns and Vacancy Rates
An important tip that is frequently overlooked is that buyers need to check that the average rent in the area will cover as much of the expenses of maintaining the property as possible. The rent you plan on charging should ideally cover aspects such as: your mortgage, tax and the cost of maintaining the property.
It will result in future issues if your property becomes more of a liability than a profitable investment, hence finding out the average rental return of properties in an area will give you a good idea of the amount you will potentially be earning from said property.
This also extends to knowing the vacancy rate in your neighbourhood. The lower the vacancy rate, the less stock that is available, which often can lead to more demand for rentals. On the flip side, a high vacancy rate means there is a lot of stock on the market and therefore supply may outweigh demand.
Less Maintenance Costs
Another aspect you should pay attention to is the age and overall condition of the property. By investing in a property that is brand new or relatively in good condition, you will be able to avoid making major improvements and renovations, thus allowing you to save money on frequent unkeeps. Cost of maintaining the property can negatively affect your cash flow therefore choosing a property that will have low maintenance costs will help your savings in the long run.