Investment Properties – What You Need To Know

Nick Bekker
March 15, 2018

Director / Principal,

Are you in the market for an investment property?

Or are you looking to sell in an area where investors are your ideal buyer? Whether you’re buying or selling, there are key factors that will determine how attractive a property is as an investment opportunity.

Capital growth

When we buy property, even if we plan to live there, our expectation is it that it will increase in value. This is capital growth.

It’s all in the name – we’re looking to invest our money in order to make more over time. Although there’s never certainty when it comes to investing, property has typically been relatively steady over the long term.

Relying on capital growth as a short term strategy brings a lot more risk, as property prices in any given area can be volatile and influenced by a lot of factors out of your control.

Take Annerley in Brisbane as an example. In Annerley, we’ve seen the median house price increase by nearly 40% since 2012 from $519,000 to $717,000. Currently, annual capital growth is sitting at 4%.

If you’re selling, this will be an attractive prospect to buyers. It’s a great example of an area that investors and owner occupiers alike are flocking to with the hope that their capital growth returns will be healthy in five to ten years.

Location

Location is everything when it comes to property investing. Close proximity to the CBD, public transport, schools, green areas and other amenities is the best way to keep rental prices edging upwards and ensure growth over the longer term.

It’s also important to choose the right kind or property – one that’s in demand in your chosen area. It may be that apartments are increasingly in demand by couples and young professionals or students, great option for first time property investors.

In Brisbane’s inner areas, we see a mixture of units, apartments and houses. For example, easy access to the city and several schools are attracting young families looking for a 3 or 4 bedroom houses close to work.

Head over heart

Buying an investment has different considerations to buying a home to live in. You can gauge how attractive your property might be to renters by how much interest there is when it’s up for sale. But don’t overextend and buy something that will eat into the return on your investment (ROI).

It’s important to have a clear understanding of your budget. Don’t fall for a house that you love or that’s popular at auction if it’s a bad financial choice.

Capital yield

ROI is your capital yield – i.e. how much income or capital growth you gain as a percentage of the capital you initially invested. At some point, the costs (mainly interest repayments) associated with buying beyond your budget may make life difficult in the short term and long term ROI impossible.

You may choose to focus on the income you can earn from your rental property as the primary driver of ROI.

Rental income

As a landlord, if you want to make money on your investment almost immediately, then you’ll be looking to maximise your rental income. This means choosing an area with high demand for rentals and the opportunity to charge enough rent for good yield (profit as a percentage of your investment).

This comes down to what your tenants will be looking for [link to rental article], both in the area and in a property. Consider if work will be required to prepare the house before tenants can move in, but also remember the tax concessions you can take advantage of as an investor.

Brisbane’s inner south offers the best of both worlds

To see reliable capital growth as well as high demand among renters, experts often recommended you buy within 2 to 12 km of the CBD. We have plenty of properties in Annerley and surrounds that will match your needs and budget as an investor. Take a look at what’s on the market.

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