The key factors to consider when selecting an investment-grade property include:
Population and long-term employment:
One of the most common factors that impact what location people want to live in is their proximity to work. Properties that are close to or in an area where long-term employment is booming have a higher potential for capital growth.
Transport infrastructure:
Improvements to transport infrastructure have a positive impact on nearby property prices. Transport infrastructure can include improvements to passenger and freight train lines, roads, free-ways, bridges, tunnels and even port expansions. Such improvements create better access to business districts and airports, reducing commute times and thereby making it a more desirable place to live.
Lifestyle amenities and features:
Purchasing a property in a location near shopping centres, golf courses and sporting centres, restaurants, schools and public transport makes the suburb a desirable place to live so naturally, there is greater demand for properties in the area. Natural features such as parkland or being close to water i.e. beaches, lakes and rivers have always commanded higher property prices. Major upgrades to amenities in a region could provide a good investment opportunity.
Schools, universities and hospitals:
Schools and hospitals help to improve demand to live in a particular region for a number of reasons. They both create jobs and as we know from the first item in this guide, people love to live close to where they work to make the commute easier. What government school children are allowed to attend generally depends on the zone they live in. Living in the zone for a good government school can be competitive and thus drive prices in the region.
Proximity to the CBD:
City suburbs in Australia’s major capitals have a record of long-term growth in property value.
Locations targeted for urban planning:
Urban planning has a significant role to play in the future sustainability of Australian cities and is undertaken in all areas of Government. Urban planning tackles such things as population growth, changes in demographics, environmental sustainability, conservation, heritage and public transport.
Capital growth:
Over the longer term, a properly selected inner-urban asset should return 3–4% of the capital value based on current conditions. The higher the capital growth, the more your net worth increases!
Rental yield:
Rental yield is simply the difference between the income you receive from renting out your property minus the overall costs of your investment. It’s often expressed as a percentage and the higher the percentage generally means greater cash flow and higher return on investment.
How to Create Value Add Potential
Understand How The Figures Work:
In order to undertake a cosmetic renovation successfully, an investor should understand the math: What will the property cost all up, including stamp duty, insurance and other costs? What will the renovation cost be, including the cost of materials, man-hours and time? What is the expected ROI for the property post-renovation, in terms of its resale value or rental yield? If the property will be resold, what are the costs associated with that sale which cut into the net profit? After all of this is taken into consideration, a property investor will be able to make a more informed decision about the financial benefits associated with a cosmetic renovation.
Identify the Feasibility:
Is the renovation’s objective feasible? Do you have the budget required to complete the renovation successfully? How will this renovation impact your schedules, such as work, travel and family commitments?
Acquire a Suitable Property:
Does the property represent good value, i.e. is it underpriced according to the market rate for comparable properties, or is it on par with market expectations? Is the property overpriced? If so, avoid the purchase and wait for a better deal. When considering a purchase, are you buying the property with your head (logic) or heart (emotion)? It’s easy to get caught up in the emotional attachment to a property, but at the end of the day property investments are all about business, and more sensible heads should prevail.
Form a Renovation Plan:
Who or whom will undertake each part of the renovation phase? Will schedules clash? Will the project be completed in time? If it’s rushed, will it compromise the quality of the end result? Are the parties involved in the renovation the best for the job? Do your research to avoid unnecessary delays, hassles and poor finishes.
Renovate:
Builder contracts, checklists and stock should all be outlined, completed, monitored and accounted for. Do you have everything you need to renovate this property the way you envisioned?
Finalise the Project:
Defects, and final payments, amongst other costs, should be covered to ensure smooth processing and project completion. Make sure you have the funds available to pay contractors on time and within budget.
Revalue and Reinvest:
When the time is right, such as an upswing in the market, have the property re-valued and borrow from the equity to make further investments in the property. This is called leapfrogging and is a core principle in property investment that can fast-track an investor to greater wealth and financial stability.
If you’re interested in learning more about how we conduct our research, and how our acquisitions department work to ensure your property is set with investment-grade growth potential, then simply enter your details below to learn more.