Because so many people successfully acquire their own home, there can be a perception that property investment is a simple exercise. These purchasers will transfer their knowledge about home buying to the investment space. Most will buy in, or near, the suburb they live in because they’re familiar with the market. Often, they’ll even acquire the same type of property because that’s what they understand best.
But as someone who buys investments for clients as a profession, I can tell you there are ways to ensure you get the best possible returns when choosing your asset.
Here are my five “must haves” for selecting an outstanding investment.
Choose a growth area
The baseline fundamental for successful property investment is always location.
You can select a standout home that would be terrific to live in, but if you buy in the wrong location, there’s a good chance you won’t make nearly enough in returns to warrant the purchase.
Selecting a growth location is key, and this is where you need to look beyond your emotions and crank up the analytical side of your brain. You must select a location that has the markers of future capital gains.
A good way to start is to think big – like at state or regional level – and then slowly focus in until you’ve unearthed the right suburbs, or even streets.
You want jurisdictions that are seeing strong population growth and infrastructure spending. You then need to look for cities and towns with adequate population density and property turnover.
Now drill down further. Look for suburbs where gentrification is underway and there’s easy access to major centres. Seek transport options, desirable schools and retail choices. You also need to analyse statistics like rental vacancy rates, the ratio of owners to renters, and the demographic makeup of the locals.
Select desirable assets
Once you have a location, the job isn’t done. You must now buy the right type of home for the best possible outcome.
You want a property type that’s going to appeal to the broadest possible renter base. If you’re in a family area, look for adequate bedrooms, bathrooms and car spaces. If you’re in an inner-city suburb, perhaps a low-maintenance townhouse or apartment that will appeal to a young professional couple would be a good choice.
You also want to make sure the asset has great liveability. Does the floor plan flow? Is there good separation of space? How about orientation? Is there good exposure to natural light and breezes? What views does the property have? Will it be easy to maintain? How is its noise attenuation?
There’s a long list of asset fundamentals that need to be met. Make sure the home ticks those boxes.
Boost rental returns
There are few ways you can boost rental returns, so look for assets that will deliver this potential.
For starters, look for properties where the existing lease appears outdated and at below market rent. In many instances landlords adopt a set-and-forget approach to their investment, which results in rent slowly slipping below market value. These owners are keeping their existing tenants happy to avoid vacancy. I’ve seen instances where properties were rented for more than $100 per week below what they could achieve on the open market. Acquire one of these and you could elevate the rental at the next renewal.
The other way to make quick returns is looking for homes where a simple upgrade or reasonable alteration can deliver even more rent. Could a coat of paint, a bit of landscaping and a very basic carport boost your income? Can an oversized family room be converted to create a bedroom and a study?
Look to manufacture equity
In the same way rents can be increased via a little renovation and remodelling, so too can market values which means more equity for you.
A well-considered set of upgrades will elevate the value of a home by multiples more than you spend on the renovations. You’d be amazed how much value is added by simply upgrading kitchen benchtops and a few appliances, a reasonable repaint and some new floor coverings.
That can equate to tens-of-thousands added to your equity position. You can release the benefit of these seemingly locked-away dollars by using them as a deposit for acquiring your next asset.
Savvy investors understand the compounding power of leveraging equity gains into multiple holdings. It’s a sure-fire way to elevate returns.
So, look for homes with smart renovation options.
Seek development angles
Another element to look for is the development twist.
I’m talking about sub-dividable sites, or something big enough and appropriately zoned for a granny flat.
Having a comprehensive understanding of local town planning requirements is a huge advantage here. For example, some Aussie councils let you subdivide into smaller lots simply for being within a certain distance of major retail hubs and transport.
Development twists improve your property’s value, because you can either carry out the project yourself, or you can sell that potential to a future buyer.
Acquiring assets that meet these five criteria will set you up for a successful investment journey. It’s just the thing professionals look for when building portfolios for their clients. Do you have what it takes to start or grow your property investment portfolio in 2023 ?
By Scott Aggett
Scott Aggett’s career and passion for real estate began in Sydney in 1995 as a licenced real estate agent. After a successful decade of residential sales and personal property investments first in Sydney and then London, Scott returned to Australia as a co-founding director and lead sales agent of Belle Property Potts Point – Sydney’s premier boutique real estate agency.
With the success of the Potts Point office, Scott went on to co-found a further two Belle Property franchises in Sydney’s Eastern Suburbs – one in Surry Hills and the other in Walsh Bay, expanding his scope from residential sales to include commercial properties as well.
From 2004 to 2015, Scott mentored and managed the transaction of hundreds of millions of dollars in sales and rentals across the three business’s agent teams. His personal investments included the purchase of twenty nine (29) properties.
Now living on the Gold Coast, focused on his young family and managing the redevelopment of residential and commercial investments both locally and overseas, Scott is vested in helping other purchasers to negotiate the best sale price and contract conditions possible through Hello Haus – his flagship contract negotiation agency.
Scott’s unique combination of professional and personal real estate success makes him an enviable resource in contract negotiations – he has succeeded in the roles of vendor, agent, purchaser, resident, business owner and investor alike and wants to see others thrive in the market as well.
