What are the most important things to look for when investing in a property for the first time? It’s a question that most budding property investors would like answered.
As property investing is largely about securing high capital growth assets, first-time investors are best off to consider multiple factors that will increase their capital growth — avoiding main roads and ensuring there’s off-street parking, for instance.
It can be tempting, however, to cast aside many of these factors that contribute to capital growth in the face of the rush of emotions that come with buying a property.
Undeniably, investing in a property for the first time is daunting, but with the right judgement and sufficient amount of time, the process is not all that difficult. In fact, I think it is quite enjoyable.
If you’re looking to invest in your first property, here’s my advice:
While it is important to ask yourself whether a tenant would be happy living in your investment property of choice, it’s also best to consider the travel distance to the CBD, how close the street is to public transport and, although it’s difficult to predict, whether the suburb will grow in the future. Usually, it comes down to a lack of supply of properties and strong demand from renters and buyers.
The two things I always look for in a property are, generally, light and heat. Despite whatever amazing features the property might have, if it is not naturally well lit, it turns me off straight away. In Sydney, most prospective home buyers are looking for north and north-east–facing aspects as these properties generally tend to be both warmer and lighter.
From organising a mortgage broker and a strata inspector to speaking with a solicitor and a buyer’s agent, getting the right advice from professionals is important. They will be able to provide you with the latest trends and insights, enabling you to make a well-informed decision.
However, once you’ve seen so many properties, it becomes hard to compare one against the other. So, like everything, make a list! It is important to take note of the number of bedrooms in each property you inspect (double bedrooms are a must), whether it has a garage, a balcony, a view, the actual selling price and more. The more time you take to research properly, the more mental energy you’re investing in your future home. This will gain you financial benefits down the track.
The rental returns of properties (above the suburb’s median price) tend to slide as a percentage of the investment the higher the property price goes. My advice is to look to buy around the median price range. If the property that you are looking to buy is within 10–20 per cent of the median price for that area, that means 70–80 per cent of the population can afford to live in it. You will always have a tenant.
In contrast, if only 5 per cent of the population can afford to rent something that’s in the top end of the market, there’s a smaller chance of finding a tenant — or a buyer, if you ever choose to sell.
Remember, your first investment is not going to be your home for life. Don’t worry if not everything about the property is absolutely pristine. A place that’s liveable enough to rent out straight away is often the most realistic and affordable option for new investors. If you have an eye for improvements, investing in a place that needs some renovations presents a real opportunity for equity.
However, when purchasing a property to “flip”, beginners should start off with small improvements rather than a complete renovation. That way, not only can you take your time saving and planning for a complete renovation, but seeing the difference between the property’s actual worth and what you can make it worth enables you to fall in love with your first investment as you envision its full potential.