How to Tell if a Property is a Good Investment

Property is a popular investment option among Australians because, if done wisely, it can potentially produce greater returns than other investment options. With so many different types of properties available and so many different areas in which to purchase, how do we ensure that the property we buy is going to be a good investment? PRD Nationwide are Canberra’s leading real estate experts. If you are looking to purchase an investment property in Canberra, there are a few things you can look for that will give you best chance at maximising your return. To help you narrow down your options, we’ve listed a few key factors that make a good property investment.

A Desirable Location

Location is key in most property investments. If the location is chosen correctly, the chance of gaining higher returns from your investment is far greater than if the location is not desirable and suitable for those looking to live close to amenities. Factors to consider include:

·       Close proximity to schools, public transportation, public facilities (post office, libraries, parks, medical centres, etc.), shops and lifestyle activities such as restaurants, café strips, beach or sporting facilities.

·       Close proximity to a major city (i.e. 10 kilometres) is always highly sought after. Whilst many of these suburbs attract higher prices, you can look for emerging suburbs nearby which may have strong growth potential. 

When selecting a location, try to avoid areas that are likely to be dependent on a sole industry such as manufacturing or mining. While be beneficial when the industry is booming, if it falls, the property’s value will likely decline as a result.

The Right Property for the Area

When searching for an investment property, you should aim to secure one which will be in continuous demand by tenants, as well as future home buyers. It is therefore important to do some research to discover the demographics of your chosen area and determine what is important to this demographic. For example, if you are buying in an area with young families, it might be better to opts for a property with three bedrooms or more and a convenient layout.  

Growth Potential

Look at what’s happening in the area or what’s planned for the area in the next few years. Is there any planned expansion or development? Will there be any infrastructure improvements? Is the population growing? Are the neighbouring suburbs experiencing capital growth? Look at the economy and whether it is growing because a strong economy means people are likely to move into the area. If there are jobs, then people will move to fill those jobs. If there are no jobs people leave the area in order to pursue employment.

Paying the Right Price

One of the biggest mistakes that new investors make is to overspend on the purchase price. When purchasing an investment property don’t jump into the market and buy something for more than it’s actually worth. This will mean that you’ve got years just for the market to catch up to the price that you paid for that property. Do your research. Check out the previous sale price of the property and compare its current price to the growth in the area. You can also check out comparable sales in the area. You can even pay to get a third party valuation done on the property, which will give you a true indication of what the property is worth. Another factor you can look at is the average days a property remains on market. If properties in an area take 6 months or longer to sell, then you don’t have to jump in and make your best offer straightaway.

The Potential to Add Value

Remember, it’s not just the property you repurchased that will determine a good or bad investment, but it’s what you make of it as well. Look for ways to maximise your income and to maximise the value for your property. With some properties this is very hard to do, especially newly built or renovated properties, but there are many simple things you can do to an older property to spruce it up to attract a higher rental income, and higher sale price when the time come to sell. You could even look at development or maybe even adding a granny flat to improve the rental yield of the property if possible. Just be careful not to underestimate how much any improvements will cost you to make and weigh up whether the cost is worth it.

Professional advice from a property expert will help you determine if investing in a property is the right decision for you. If you are looking for a great investment property in Canberra, then get in touch with the team at PRD Nationwide today on (02) 6262 5232, contact us online or browse our property listings now.