Finding an investment property

The property you buy for an investment may not be a type of home you yourself would live in. It’s important to approach it as an investment decision, not an emotional one.

You need to do your research: if you get it right, the current rental shortage and rising rents could help you reap the rewards.

Here is a list of topics to research before deciding what type and location of property could make a sound investment choice. 

Rental vacancy rates

A quick online search will provide information on vacancy rates in general, and often within specific cities and towns. You’re looking for low vacancy rates when the economy is strong, and high when the economy is slowing. Obviously, you want to buy at a time and in a location that vacancy rates are low, increasing demand for available properties. Local real estate agents can also help you with this. 

Rental returns

What can you expect to get in rental return? What areas have the highest rentals, which have the lowest? Much of this information is, again, available online. While you may not be looking to cover your costs (see positive vs. negative gearing), you will need to know what will be coming in as well as what your outgoings will be. 

Make a budget

Work out what your loan will cost you based on the type of property you’re looking at, and what your income from the property is likely to be. Budget to allow for the property to be vacant for one month of the year. Find out what the average outgoings on the property will be. Now tally up the actual costs to you, even if there’s a tax advantage. Check it’s a realistic and affordable investment option. 

Research the market

Check local newspapers for the jobs vacant pages to assess the employment market. It’ll be useful to review population trends in the area, age and demographics, average wages, development forecasts, etc. Much of this can be found from sources such as the Australian Bureau of Statistics (www.abs.gov.au), the local council, and regional government. 

Off the plan

If you are looking at buying off the plan (i.e. before the property is built), check out the credentials of the developer. Do a company search online and at the ASIC site and through Fair Trading offices.