What Makes A Good Investment Property

Possessing a second or third property can pose significant personal and financial challenges. A typical landlord contends with holding costs, taxes, tenant management, and maintenance, all in anticipation of a future payoff.

Regardless of the eventual return, the Australian Taxation Office (ATO) imposes a minimum tax rate between 25% to 45% on the profit after the property is sold. 

At Wise, we maintain the conviction that if you’re making the choice to invest in property, the ultimate goal should be for the property to provide financial freedom rather than hinder it.

It is valuable to optimize your purchase and ensure it stands out as much as possible.

What makes a good investment property

Underperforming Property

Some may wonder, what characterizes an underperforming property? Typically, it involves owners grappling with poor capital growth, challenges in leasing with extended periods of vacancy on the market, and high outgoing expenses like body corporates or significant maintenance fees.

The challenges outlined above result in a property that is hard to sell, becomes a financial drain unable to sustain itself, and requires extensive financial support from its owner.

It’s fair to ask the question
what else could your hard earned money be doing for you if you didn’t own this property? This is called opportunity cost.

Opportunity cost is the potential value that is forfeited when one choice is made over another. It signifies the benefits or profits that are sacrificed by not opting for the next best alternative in the decision-making process.

Our buyers agents encounter this kind of property all the time and recommend being cautious with the following type of property: 

  • Buying and investing in an older property, and then finding out it will cost a lot to repair and renovate.
  • Investing in high density apartment areas, and then other apartment buildings being built in closer areas, thus affecting its value.
  • Overpaying for a property than expected and the property value not increasing.
  • Buying a land package or a property in new estates where it has a large volume of empty block, thus reducing the shortage factor.
  • The asking price seems too good to be true
  • Buying properties in hotspots during a boom period, but then dropping dramatically.

Smart Investment Properties Have:  

Close infrastructure

Investment growth is positively influenced by properties situated in close proximity to train stations, schools, shopping centers, and other amenities. This is due to their heightened desirability and enhanced lifestyle appeal for both renters and buyers.

Properties experiencing optimal capital growth typically possess a planned infrastructure pipeline, which can positively influence the property’s future sales price.

You can more information from Victorian Infrastructure Plan site or the local council. 

History Of Growth.

History tends to repeat itself. If a property has demonstrated strong performance over the past 20 years, there’s no reason why it shouldn’t continue to excel in the next 20 years.

This basic level of due diligence can yield substantial dividends after the property purchase.

All Real estate agents utilize property reports to illustrate suburb price growth through monthly, yearly, and 10-year comparisons.

A buyer’s agents invests the time to acquire and analyze this data, identifying market peaks and troughs, as well as dormant suburbs poised for a property price boom.

Avoid Booming Suburbs.

Frequently, the most sought-after suburbs have already undergone a price peak and boom, and it might take several years before they experience a similar cycle. Investing in these suburbs could mean paying a premium for a slower return compared to a less popular suburb.

Therefore, when seeking a suburb for investment, consider the next viable option with a comparable price range. You’re likely to invest in a suburb that has yet to experience a boom, offering the potential for a fruitful return.

Location, Location, Location

What contributes the most to increasing property prices? While a real estate agent might attribute it to their agency, the reality is that it’s the buyers competing with their dollars to secure a property in their favorite location. 

Tenants operate on a similar principle, and to reduce the duration of vacancy over the property’s ownership, the key lies in making a wise purchase.

Finding Value: The vicinity of sought-after suburbs 

There are always suburbs that everyone desires to live in. In the west of Melbourne, it’s Williamstown; in the southeast, it’s Brighton. Such suburbs experience the highest demand and substantial growth in real estate.

It’s common for buyers and tenants to find themselves priced out of these areas, leading them to consider neighboring regions, thereby transferring the success of the sought-after suburbs to their surroundings.

Less Buyers, Better Price.  

Many real estate buyers shy away from properties that may need a coat of paint, a new garden, or even a light renovation. They are inclined to pay a premium for a turnkey property that requires no additional effort. For savvy investors, however, these opportunities are akin to picking low-hanging fruit.

Two For The Price Of One

Everyone understands that the true value of real estate lies in the land, as the building itself depreciates over time due to wear and tear. A savvy investor seeks properties with subdivision potential, as this provides various options such as positive gearing or generating cash by selling a portion of the property.

Seeking Professional Support

Accumulating experience and street smarts is crucial when making purchases in life, especially in the realm of real estate. A well-informed decision can be the determining factor between long-term success or failure.

Utilizing the expertise of professional property buyers is essential for every buyer, as it helps steer clear of the pitfalls and give you the leverage of their experience and knowledge.

For more information on a buyer’s agent service click here.