Simple Tips for Buying an Investment Property

Location, location, location! Real estate agents often emphasise how important location is when buying a property.

Following are a few alternative tips that you can take into consideration when buying your next investment.

• Try buying during the upswing stage of the property cycle.
• Buy properties in lower socio-economic areas that are priced below the market, with the potential of improving. It may be worthwhile looking interstate or outside of your area to achieve this. Market research reports will easily highlight these areas.
• Look for the right suburb. A suburb that has outperformed the averages in the past is likely to continue to do so. Suburbs close to a CBD or water are often good achievers.
• Buy the right type of property. A property in an area that will achieve good capital growth will always appeal to future owners. As an investment property, you will also need to ensure that it appeals to a wide range of tenants. Consider medium-density housing. While, traditionally, houses have been favoured, more of the population are now opting to rent units, townhouses and duplexes for their affordable cost, ease of living upkeep and an increasing trend of singles/sole tenant living.
• The property must generate a steady cash-flow. While this should not be the driving factor when buying a property, it is nice to have consistency with income to pay the mortgage.
• Your investment property should be tax-effective and provide good depreciation allowances. New houses and houses that have been renovated may provide good depreciation allowances.