When you buy an investment property, you consider not your personal tastes but the needs of your potential tenant and buyer.

Buying an investment property is an entirely different game from buying your own home. When you buy an investment property, you consider not your personal tastes but the needs of your potential tenant and buyer.

Any dwelling can be an investment property, but not all can be a profitable one. Before you shop around and start building your investment portfolio, see to it that you know how to see potential from the properties that you will encounter.

Take note that there are two ways you can make money from an investment property — either by leasing or selling it. If you lease your property, you get a steady stream of money in the form of rents. On the other hand, the amount you will get by selling the property depends on the growth of its value over time.

The more the property grows its value, the more lucrative and profitable it will be. Asking yourselves these questions will help you determine which properties are suited for an investment portfolio:

Is the investment property strategically located?

Perhaps the most important thing to consider when buying an investment property is the location. The location dictates everything —the price of the property, the type of tenants you would likely have, and the ideal rent you can impose.

There are many considerations when choosing a location, but the most important thing is to make sure that the property is strategically placed. Here are the things you should look for in the locality of your property:

1. Accessibility

The most important thing in the list is the property's accessibility. Is it near major roads and highways that can make commuting convenient and easy? Are there many transport options available? Is walking an option when going to the nearest shops and other areas of interest?

2. Safety

When looking at safety, it is not always about security from crimes. Safety also involves making sure that your property is not in a location prone to bushfires, flooding, high winds, and other environmental hazards.

3. Convenience

Another vital factor in choosing the location is the convenience it will bring to potential tenants. The more convenient the place of the property is, the more you can justify higher rental costs.

What is the infrastructure like in the area of your choice? For these criteria, you have to see if the location is near supermarkets, hospital, schools, malls, parks, restaurants, and any other location which is of interest.

Does the property appeal to a wide market?

It is important that you look closely at the demographics of your potential tenants when looking for a property. As a general rule, your property should be able to cater to at least two market segments.

Your location will usually dictate what type of tenants you will most likely attract. If you are getting a unit within close proximity to a business district, your property will get considerable demand from young professionals and workers. Places near schools will let you attract students — the only downside is that there are times, particularly during summer holidays, when there are high chances that your property will be vacated.

On the other hand, when you get a detached home tucked in a quiet neighbourhood, you will most likely get the attention of young couples who are starting to build their own families.

The presentation of your property will also influence the type of tenants you will get. In order not to polarize any potential tenant, you have to see to it that you make the property as neutral as possible when it comes to aesthetics. For instance, instead of splashing the walls of the house with the trending colour of the year, opt to paint them with neutral colours instead like white, cream, beige, and taupe. Do the same with floors and choose materials. Incorporate style and designs which can easily be paired with other design elements.

The key here is to make the home a blank canvass that your tenant can use to express their own individual style. Just make sure that whatever your tenant wishes to alter inside and outside the house should be agreed upon by both parties.

Do you need to renovate the property to make a good investment?

Renovation can really boost the value of your investment property — not only will it be more attractive to potential tenants, but it will also provide you with healthy gains once you decide to sell the property.

Be strategic when you renovate. Prioritise high-traffic rooms like kitchen and bathrooms when you are planning which parts of the house will get a facelift. It is also necessary to be updated with current trends in design to make your home modern-looking.

Do not fear the word renovation — it does not always entail splurging on new walls, new floors, and new furniture.

A renovation can be as simple as changing the paint of the walls. As mentioned earlier, choose neutral paint colours that will make the rooms seem more spacious than they are. You can also replace door, window, and cabinet handles in your kitchen and bathroom with shiny and modern ones to give the room an instant makeover — all for a minimum cost.

When it comes to flooring, a new carpet can transform the look and feel of a room without breaking the bank.

You can also try these cheap tricks:

  • Installing mirrors in strategic places to make the room look bigger.
  • Repurposing old cabinets as bathroom fixtures
  • Replacing old toilets, showers, and taps with new ones
  • Removing unnecessary doors to achieve an open floorplan
  • Trying downlights in certain rooms to give a cozy feel
  • Place additional storage cabinets in bedrooms and bathrooms

Curious about how much you can borrow for a home loan? Try Your Mortgage's home loan calculator here!