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How to identify a good investment
Far from providing clarity, the digital age has made sorting good investments from bad ones an even more complex process. So how do you recognise a good opportunity when you see one?
Blogger: Julie Cumming, director, Hatch Property
There is so much 'noise' in this space electronically now, that it is often overwhelming and difficult to get clarity on what may in fact be a good investment.
So how will you know what is a good opportunity from all the noise and rubble?
Well, it’s back to basics.
Always look at the location and size of the development, relative to its location. There is plenty of information available, warning of the oversupply of units in most CBD areas around Australia. A unit block of 90 apartments or more may seem appropriate in a central CBD location, yet not as appropriate in a suburban area. A small boutique development can be a block of 35 apartments close to the city, yet in the suburbs 10 or less is more likely considered to be boutique. I suggest you stay away from the repetitive inner-city product and start looking from the city fringe outwards.
Once you have identified a development that is well located, consider closely the individual dwellings being offered.
• How big are they?
• Do they have some quality outdoor areas?
• What is the layout like? Consider the aspect and the effects of weather.
• What size are the individual rooms? Are the bedrooms a reasonable size?
• Is there ample storage?
• Has privacy been considered?
• Is the parking adequate for residents and visitors?
• What developments are nearby, and how will this affect street parking?
• Is there public transport within a short walk?
If you have ever rented, you will know that generally you tend to compromise on features within your home. However, the best outcome for an investor is to buy a property that is aimed at the owner-occupier market. When you go to sell, you don’t only want a number-crunching investor like you looking! An owner-occupier will tend to be far more interested in the features required to meet their needs.
Ask the agent what the mix of investors and owners is. Ask them if they have to get pre sales to get started and, if so, if they are marketing to overseas investors. All this information helps you understand the likely tenancy mix at completion that will affect values, tenant appeal and response. If there are lots of investors, you may have to drop your initial asking rent to tenant the property quickly.
On the other hand, if the development is predominantly owners, then you have the upper hand. Check the rental appraisal indicated in the sales information with independent local agents and have a look to see how many similar dwellings are being marketed to rent in the area at the current time.
Then you need to select which dwelling has the edge over the others. Look at the aspect, the location within the building, the views, the layout, and the relative pricing.
There is a lot to consider and many people find investing, particularly in an interstate market, difficult and daunting as they have to navigate a great deal of unknown territory. Seek experienced, quality advice if you are unsure. A lot of money is at stake, and while there are many excellent opportunities out there, there are also plenty to stay away from. Choose wisely!
Read more:
Investors warned about property 'hotspot'
Exlusive: The 6 week property transformation - episode 2
Aussie price growth put in perspective
Investors turning to commercial property
What is the Australian property dream?
