There are eight factors to take into consideration when researching a property to add to your portfolio, according to an industry expert.
A piece penned by Mayfair Finance’s Andrew Rowlands has explored what he dubs as an “essential property research checklist” for investors.
“Buying your first home or investment property is exciting! Like planning for a holiday, you start researching about the fun things you want to do,” Mr Rowlands wrote.
“Out of excitement, you also start looking up other activities not in the original plan, instead of researching the basics, like accommodation and transportation options. Buying a property is the same, it requires the same level of commitment towards research. But where to start?’
Here are eight points to be wary of when researching a property, according to Mr Rowlands:
1. An understanding of your borrowing power
“Having an accurate idea of your borrowing power will help ensure that you’re looking in the right price range from the very start,” Mr Rowlands said.
2. Making sure you have a set criteria for your desired property
“It’ll be easier to research the property that you’re looking for when you have a set of criteria,” Mr Rowlands explained.
“With a lot of quality properties to choose from, it’s easy to fall in love with aesthetics, so it’s important to make sure that the property meets your requirements.
“Here are some useful questions to ask yourself when listing down your set of criteria: What is your main purpose or reason for buying a property? How long do you plan on staying in the property? Do you have a budget for ongoing repairs and maintenance? Who would potentially rent your property or buy it when you decide to sell?”
3. Being across suburbs and surrounding areas
“Whether you’re a home buyer or an investor, the aim is to purchase in a suburb with solid capital growth potential,” Mr Rowlands said.
“It’s also better to buy in a suburb where it’s in its early stages of growth rather than at the peak of a growth cycle. The surrounding area is also worth looking into. Get to know the local transportation situation, as well as local facilities located at a walking distance or just a short drive away.”
4. The property’s current condition
“When inspecting the property, check both the inside and outside conditions,” Mr Rowlands advised.
Some items to include in your checklist are as follows, he said.
• Check the ceilings for water stains and the cornices for waviness – indications of water leaks.
• If there are carpets, check the situation underneath – if there’s cement or floorboards.
• Be mindful of the evenness of the floor.
• Get in touch with your mortgage broker for referrals on building and pest inspections.
• Check for cracks in the brickwork.
• Check for mildew in the eaves.
• Be mindful of cracks in the driveway.
5. Price comparison
“It’s best to compare prices with other recent property sales in the same location to make sure that you’re getting a reasonable deal,” Mr Rowlands said.
“There are a lot of online resources for this, where you can research property sales in a specific location, and you could compare with other properties with comparable conditions and land size. Don’t forget to also include ongoing costs in your budget.
“Research the ongoing costs that will be applicable to your desired property, such as council rates, strata fees and water costs.”
6. The average rental yield
Mr Rowlands advised investors to consider the average rental yield of the area and of the property itself.
“This means finding out the potential rental income. If there’s a strong demand in the area, the rental yield may be higher,” he said.
“On the other hand, if there’s a high vacancy rate, the rental yield may decline. There are useful online resources where you can access market reports on specific areas. The data include details about median prices, growth rates and rental yields.”
7. Prior knowledge of the property
“You may want to get to know the property a little bit more by researching its history,” Mr Rowlands said.
“You can trace the history of a property through online archives, street directories, council rate books and Title Office records.
“It’s also important to know if the area or property has been flooded before, as this can greatly affect the property’s resale value.”
8. Asking yourself who’s best to help
“Make sure to consult with reliable professionals who can give you advice that’s useful in your property hunting journey,” Mr Rowlands said.
“Best practice is to ask for recommendations from friends and family based on their experience with that service provider. You can also check reviews and testimonials.”