Property is a consistently safe investment option, but choosing the right investment property to bring in strong rental returns calls for careful planning.
Guest blogger Maria Edwards – Peter Blackshaw Business Development Manager, Woden and Weston Creek.
How do you balance tenants’ needs with your own financial goals? Here are some of the key points to keep in mind when making your decision.
Put your financial goals first
Your financial security is the most important factor when choosing an investment property. Consider whether you’re buying for a short-term investment or looking to maintain the property longer term. In this case, the projected rental returns will be all the more important.
Before you start your search, consider whether this will be an investment-only property, or one that you plan to move into in the future.
Find out what tenants are looking for
Tenants all have different priorities, but generally speaking the more boxes a property ticks, the higher your rental returns will be. Focus on these key areas:
Location: Look for family homes close to schools and bus routes, apartments close to cafes and entertainment.
Appearance: Remember that a clean, well-maintained home will usually be more appealing to tenants than an ultra-modern home that’s ultimately difficult to care for.
A flexible configuration: Steer clear of four-bedroom/one-bathroom properties – aim for a more even balance of bedrooms and bathrooms instead. Single level properties are also worth seeking out as they will appeal to a wider range of prospective tenants.
Lease security: You may have strong reasons for a short or long-term lease, but stay open to negotiation. This could be the deciding factor for the right tenant.
Understand the supply factor
There’s an ongoing shortage of quality rental properties across the ACT. This is mainly because our population is currently growing more quickly than new homes can be built. A chronic shortage of new land and established homes means demand for free standing properties is steady. Investors will continue to see strong returns.
That said, there are some exceptions when it comes to Canberra’s supply and demand. In Belconnen, the Inner South and Weston Creek, a number of medium density developments have flooded the market. This has caused the supply of units here to exceed demand. In time, this could put pressure on landlords to reduce their rents in order to attract and retain tenants.
Beware the ‘blue door’ factor
As an investor planning to rent, there are very few ‘bad’ areas in the ACT. The vast majority of properties will attract tenants within a reasonable timeframe. The investors who encounter financial difficulties tend to be those who fall prey to the ‘blue door’ factor – people who buy a property simply for one of its charming features. They ignore larger maintenance issues and other potential barriers to finding and keeping tenants.
Your first step: Get professional advice
Before you set out to find your ideal investment property, it’s crucial to get expert advice on your particular financial situation. You should know your exact budget, desired rental returns and the other costs involved. You should also contact Milestone Lending for a pre-approval. This will mean you’ll be better equipped to buy a property that contributes to your long-term financial stability.