The right investment property will grow your wealth over time.
However, a poorly chosen one will do the opposite, and a mistake like this can be expensive to fix. As a buyers agent, I focus not only on finding good buys for my clients, but also – perhaps even more importantly – steering them away from the lemons. My strategy is steady growth over time, and a big part of this is avoiding trouble.
So what are some tried and tested strategies for avoiding investment mistakes? Here are five that are worth knowing about.
Be wary of spruikers
Look at how heavily a property is being marketed. Is there a swish sales office and glossy brochures? Are their sales people working hard to convince you it’s a good buy? Now I am not saying it’s not and I would not automatically dismiss an investment property with this kind of marketing.
But in my years of investing, I’ve found that the best properties are often those flying under the radar. It’s these ones that I make it my business to track down, and that often prove to be the best buys over time.
Remember that you’re investing in location as well as a property
Location is key, and as I carry out property research across Australia, one thought is always at the top of my mind – what’s on offer for tenants?
This includes infrastructure such as schools, public transport and shops, as well as things to do on weekends, such as parkland and sporting facilities. It’s important to invest in areas where there are things on offer now, not promised in twenty years. Because as we know, things can change quickly. No matter how beautiful the apartment, if the location isn’t great it won’t attract a lot of interest from tenants.
Understand what you’re getting for your outlay
It’s important when investing to understand exactly what’s on offer. Be wary of off-the-plan apartments, where you are buying sight unseen and can’t walk through the property before committing to it.
Ideally, you need to view the property yourself or have someone view it for you. It’s also worth looking into development plans for the area and for the property itself, particularly if it’s part of a complex. What work has been done, what work is planned, how much money is set aside for future works?
When I am negotiating on behalf of my clients, I will ask every question that needs an answer to ensure that you don’t have any unexpected surprises once you’ve signed the contract.
Ask yourself if you can add value to the property
When looking at a property, one of the things I will also consider is whether there’s scope to add value. Can you renovate, add more space such as an extra bedroom, or subdivide the block. If there’s nothing to add value, is it really a good investment or one when the seller is the only one who stands to make a profit
Having said all that, I would not rule out a new build if it’s in a great location, will appeal to tenants and is fairly priced. There can be tax benefits to new builds that make these a sound investment too.
One point about renovations, though: for investment properties, you don’t want to be spending three years renovating, as you might with your dream home.
Remember, cosmetic problems can be fixed, but structural ones should be avoided as they will cost you time and money, and there’s also an element of uncertainty. Ideally, an investment property should be tenant-ready fairly soon after purchase, so it’s earning an income.