When it comes to real estate, cheap doesn’t always mean cheerful. We show you how to sort through the “bargain duds” to locate an affordable, high quality property investment that delivers profits well into the future.
It’s a buyer’s market out there, which means that would-be homeowners and investors pretty much have their pick of the property litter.
With fewer buyers in the market place and more properties available for sale, homes are taking longer to sell and anxious vendors are dropping their prices as a result.
Gloomy economic forecasts and uncertainty over interest rates is causing many buyers to pause, but savvy investors would be smart toact now and buy “while prices are low”, says David Cross, head of property research at The Investors Club.
“We have been through tumultuous times before and no doubt will again. It’s better to buy now when prices are reasonable than wait for the boom and be priced out of the market,” he says.
“As long as you are guided by a few important tips, you will yield good returns in the long term.”
However, Cross cautions investors not to rush in and buy property simply because it’s more affordable. He believes that research is imperative, and says the key to buying an investment property in any market is locating the areas in each city that have growth drivers.
“Some suburbs will do well even if overall city property growth figures are not favourable. Buy in areas with strong demand from renters; focus on areas with forecasted growth in population, employment, industry and infrastructure,” Cross says.
He shares hishot tips for buying a quality property investment:
Research ABS data to locate suburbs and areas with a minimum of 2% population growth forecast, jobs growth and infrastructure projects to match.This will ensure that your property is always in demand from renters.
2. Seek out short supply
Check with the local council to find out if there are more housing developments proposed for the area. Is there a restriction on supply coming through?
3. Look for rental opportunities
Liaise with leasing agents to find out what type of property is in the most demand from that suburb. Is it housing or units? Is it a three bedroom house or 1-2 bedroom unit? This will help to guide your buying decision. Also ask agents how many days properties are vacant before tenants are found; lower vacancy indicates short supply and potential for rental growth.
4. Use a cash flow analysis calculator
Regardless of how cheap the deal is, you need to make sure it stacks up financially for you and your personal situation. Use a cash flow calculator to confirm that you can afford to hold the property if the rates go up 2%.
5. Pay the right price
When you’ve shortlisted your property candidates, work out which property (if all other points are equal) gives the highest rent return.