Rookie investors are choosing to purchase this property type above others, and it’s all down to two key factors.
Blogger: Paul Bennion, managing director, DEPPRO
One-bedroom apartments are generally favoured by rookie investors as their first step on the property investment ladder.
A review of tax depreciation schedules that DEPPRO has completed for first-time investors during 2015 reveals that a high proportion of them are for one-bedroom apartments.
Rookie property investors are attracted to purchasing one-bedroom apartments for a number of reasons.
Firstly, they offer a lower-cost entry point into the property market compared to buying a larger property.
For first-time investors with limited financial resources, this is an attractive option especially if the apartment is located in an area with high capital growth potential.
Another attraction of one-bedroom apartments is because there is a high demand for this type of rental accommodation, as more people are living alone today due to major demographic changes in our society over recent years.
These two factors – lower-price entry cost and high rental demand – mean that rental returns for one-bedders are favourable for rookie investors.
It also gives new investors experience in the property market, while at same time not financially over committing themselves.
In addition, new one-bedroom apartments also deliver first-time investors generous tax deprecation benefits that assist with the overall cash flow.
Developers are responding to this demand with new apartment complexes now having a greater proportion of one-bedroom apartments compared with a decade ago.
If you are considering buying an investment property for the first time, then you should consider the following points:
- Use the RCC location rule when buying an investment property. It should be located either near a river, coast or city centre. Properties in these areas generally have demonstrated higher rates of capital growth and rental returns.
- If you are buying off-the-plan, check the track record of the developer as to whether they can deliver the product they are promising.
- One-bedroom apartments with attractive views have a higher resale value.
- Consider buying a property where there is a broad range of property owners rather than just investors. For example, if the area has a significant number of owner-occupied homes it means that the potential pool of people wanting to buy your investment property in the future will be much higher than a property that just appeals to investors.
- Rental income is a key factor when choosing an investment property. Your property should be located close to schools, shops and transport to attract the highest number of tenants.
- Always work towards a strategy of buying several investment properties rather than just one or two. Through owning several investment properties, you can create significant amounts of personal wealth. To achieve this outcome, put in place a long-term strategy and stick to it.
- If you plan to buy investment properties, make sure you obtain professional financial and taxation advice. Getting the correct finance in place can be just as important as selecting the investment property.
About the Blogger
Paul Bennion is the managing director of DEPPRO tax depreciation specialists.
DEPPRO Pty Ltd is Australia’s leading property depreciation company, specialising solely in the preparation of tax depreciation reports for residential, commercial, industrial and leisure investment properties.