Buying your first home can be an exciting time. Having the perfect vision in your head of what you want your home to look like and visualising yourself and your family living there. You mentally work out where your furniture will go and imagine the life you’ll have in that home.
When it comes to finding the right investment property, however, it may not be as exciting. Visualising the property is not as easy and it can quickly become an overwhelming process, especially if you don’t know what you’re looking for or even where to start.
As a first time investor, selecting a property is not about imagining yourself in the space, because you won’t be living there. It’s about all the numbers stacking up and your confidence that the property is going to meet your requirements to help you achieve your investment goals.
So what are these requirements and how can you be sure that the property you are looking for is going to be suitable for you?
When finding the right investment property you will need to know the following factors:
Know your strategy – Everyone will approach property investing with a different strategy. Some will want to simply build a portfolio and buy and hold as much property as possible, while others may want to get into renovation and make fast money by adding value and on selling the property for a higher price. Being clear on your investment strategy before you even start looking at properties will help you narrow down considerably what you are looking for.
Know your budget – Knowing how much money you have to invest in a property will quickly eliminate areas and properties that you simply cannot afford to buy. Remember, the numbers will be a big deciding factor when you’re buying an investment property. If the numbers don’t add up then the property is not suitable for you.
Know your property type – Decide what type of property you want to invest in. Are you looking for a house on land, a unit, a townhouse or some other type of property? Deciding on one property type and only looking at these properties will help you avoid confusion as you’re comparing apples for apples. Each property type will also have different requirements that you need to check and assess. Sticking to only one property type will help you avoid any oversights when paying your due diligence.
The location – There are thousands of different locations in which to buy a property, and choosing a location can be the one thing that initially stops investors from getting started. The process begins by first selecting a state, then a region, followed by a suburb and then the best location within that suburb. If you have no knowledge of the areas that you are looking at, it can be confusing. Homely’s suburb reviews can be a good starting point to check out opinions and ratings of different areas.
There are also many other factors to consider when selecting a location. What infrastructure is available in that area? What is the demographic? Is there employment opportunities there, or easy access to services? You also need to assess where that location is in the property cycle. Is it a rising market where properties are selling quickly or a slowing market where you have your pick of properties? Is there good demand for rentals?
If selecting a location becomes all too much then your best bet is to start with areas you know. Start by looking at suburbs you’re familiar with.
Once you have these four factors clear and an investment strategy in place you can then begin to narrow down on the property requirements in relation to size, bedrooms, bathrooms, car spaces etc.
But until you do the groundwork and are absolutely clear on your property requirements, then selecting an investment property will come down to little more than guess work.
For an in depth checklist on what to look out for when inspecting properties, check out the Chicks and Mortar Property Inspection Pocket book.