Investing Principles

So you are looking at investing in property, but not sure where to begin or what factors you need to consider before you take the plunge? Well intelligent and profitable property investing highly depends on extensive and thorough research, careful and precise preparation and superior judgement. So before you jump into the deep end of property investing, take into account the following influential factors that may impact your final decision.

Rental Return

Investors need to consider both the rental return of their investment property as well as the potential capital gain. Some individual Investors circumstances may lead them to favour a particular area and property which promises high long term growth but lower rental returns. On the other hand, other property investors may prefer a property and area that yields a stronger ongoing cash flow, but with lower capital gain. It is important for investors to look at their investment position and evaluate their investment goals in order to determine what arrangement will suit their needs.

Unit, House, Townhouse?

Although you may have your heart set on buying a house as an investment property, it is wise to take another look at your budget in order to realistically determine what you can afford as well as what best suits your needs and your property investment goals. Historically, Investors have tended to favour units as a choice for their investment properties. This is because there is generally a higher tenant demand for units and the price range is usually lower and more attractive to renters. Furthermore, Investors usually sway towards purchasing newer or even brand new properties. This is because it is generally the case that the overall maintenance costs of the property will be lower and also depreciation tax deductions are higher.

Location of your Investment Property

Location is a critical factor in determining the success and growth of your rental property. As a golden rule a property that is close to public transport, community amenities, shopping centres, businesses and popular schools will always be an attractive choice with potential renters. Furthermore, if you wish to take a hands on approach to your investments, it may also be wise to look at properties that are within a short driving distance of your own home.

Time frame of your Investment

Although you might not know what will happen in five years time, it is still a good idea to think about how long you intend to hold onto your investment property for. When making this decision you should also take into consideration your original investment goals as well as your financial position, as both of these factors will have an influence on the term of your investment. Keep in mind that property investing is a long term investment and if you sell your property in the short term you may not be able to get back all of your fixed costs.

Vacancy Rates

If there is a low number of rental properties on the market, then there will be a high level of demand and as a consequence rental prices will rise. However if there is a large number of rental properties available, and not enough tenants looking to rent, then the opposite will occur and rental prices will fall. Vacancy rates can also differ slightly from suburb to suburb and they are driven by market conditions. So it is important to talk to one of the Property Managers from D F Johnson Real Estate about the current market vacancy levels as well as the projected growth in the area that you wish to purchase.