Researching Potential Property Deals
Before jumping into a new property purchase, extensive research should be done. As an investor
if you are already intimately familiar with an area and a property, then you may be able to jump
on a property deal before the next buyer can snatch it up; however, if you are unfamiliar with the
location, you need to do some research first.
Research can be conducted in a few different ways. The first thing to do is to get to know the area.
You can start with some internet research, looking up local neighbourhood information, tenancy
rates, population growth statistics and local council activities.
The internet is full of useful statistical
information, too, such as data on tenancy rates, rental returns and location-specific demographics.
Be sure to research the region and the property not from your own personal perspective, but
more importantly, from the perspective of your tenant. Who is going to be renting your investment property?
Who is the tenant, and what are they going to be looking for in a property?
These are the things that you must consider when you research a particular area or property. Many
people mistakenly focus on the ‘bells and whistles’ of the property, but the cosmetic features of
any investment should take a backseat to the fundamental supply and demand that exists.
Look at the demographic of your neighbourhood and ask ‘What does your likely tenant want in a
property’?
Not only that, you need to be guided by the investment fundamentals of the area.
In other words, a nice kitchen and a new bathroom are great.
But unless the area boasts high rental
returns, strong capital growth potential and surging demand from renters, then the investment
simply won’t stack up.
Qualifying Your Research
Since the property you’re looking at is being ‘marketed’ by its previous owners, it’s always
beneficial to obtain independent, third party information and advice.
Previous owners may not be
the right people to answer questions about the property so instead, try talking to the neighbours.
In many cases, gossip spreads through town like a wildfire so if there is something wrong with the
property, the neighbours can probably tell you every juicy detail about it!
Likewise, if the property is a great buy, the neighbours will quite likely let a potential buyer know how
great the property is, what the local neighbourhood is like and whether many other buyers have been
sniffing around.
Other ways to qualify your research about property is by attending auctions and finding out
about inspections that may have been already completed on the property.
Keep track of all the
information you collect, even if it may not seem important at the time.
Population Growth
The population growth of a location can be an indicator of its desirability. If the population is
continuously growing, it means that the location is sought after and attracting new residents on an
on-going basis.
On the other hand, if the population is declining, this may be an indicator that there are underlying
problems with the location or that the economy is on a downslide.
A growing population is one thing, but the most important factor you need to ascertain is this: is
population growth creating a situation where demand is outstripping supply?
If the population is swelling but thousands of new house and land packages are flooding the
market, then it may be wise to rethink your investment.
The key factor is not population growth on
its own, but when demand is greater than supply, you know you’re onto a winner.
Desirability
The liveability of a neighbourhood is a good indicator of whether it will be a good quality investment
or not. Before deciding to buy a piece of property in a certain location, you should talk to other
people who live in the neighbourhood.
Are there enough local amenities?
Do people enjoy living in
the area?
What types of people like to live there?
Also, find out how others feel about the neighbourhood. If a majority of the locals describe it as a
pleasant place to live, and outsiders also speak favourably of it, then buying property in that area
may be a great investment to consider.
Amenities
Some towns are extremely small and do not have many amenities, and towns such as these may
not represent a good investment. While some people enjoy the closeness of small towns, others
tend to run the other direction.
Your preference partly boils down to personal choice, but it’s
important that you make your decision based on the positive investing fundamentals of the town.
Regardless of its size, if the area has plenty of attractions, it will make the residents’ lives easier.
Therefore, more people will find that area an attractive place to live, and buying property in that
town may be a good investment. Potential investors should look for amenities such as child
care, quality of public school systems, access to public transportation, and the availability and
cleanliness of parks.
Shopping
Shopping centres are an important aspect to look for before purchasing property. While people can
go to nearby towns for luxury or specialist shopping, it is important to have a supermarket in the
vicinity for everyday items. A local store within walking distance of the property you’re looking at
doesn’t hurt either.
Keep in mind that when the “big majors” are moving into a town, that’s a good sign for the future
growth and development of the area. Major players like Bunnings, Harvey Norman, Myer and
Target invest signficant sums of money into research, to ensure that an area has a large and
growing population to support their business.
It pays to leverage off their research and invest in
nearby locales.
Area Developments
If there are new houses and buildings being built in the area, this may be an indicator of the market
appreciating. If the area is losing value, it is unlikely that there will be new developments underway.
However, be careful that you don’t enter a market where over-supply will become an issue; this
could happen if several new developments get started at once, flooding the market with new stock.
Area Improvements
Improvements to the area can only be good for business. Some improvements to look for include
expansions to roads, redeveloped foreshores and marinas, extended public transport services, and
upgrades to local buildings such as schools, hospitals, and libraries.
Social Demographic
This is another important aspect to look for before purchasing property in a certain location. The
aim is to find out what types of people live in the area.
Is it a safe neighbourhood?
Is the crime rate
low?
Is it a family-friendly neighbourhood with plenty of parks and recreational facilities?
Before deciding on a location, buyers should also consider the incomes of the current residents. If
the incomes are typically low, it would not be a good idea to build or buy a high-priced house in the
area. Incomes that are on the way up are always a good sign for a region’s prosperity.
Your best strategy is generally to invest in an area that most people can afford, as this is going to
give you the biggest market of buyers for when it comes time to sell.
So while you don’t want to
buy a big mansion in an affluent suburb, you don’t want a rundown slum either.
What to Look for in an Investment Property
It goes without saying that before you invest in any property, you need to make sure that it is worth
investing the time and money into the deal. It should be something that will be attractive to renters
and potential buyers, and that has the potential for value to be added down the track.
You can begin to evaluate the property by…
1. Comparing Neighbouring Property Values
Before purchasing a new property, do some research on the values of other houses in and around
the neighbourhood.
This should include the prices that the houses were sold for in the past as well
as the prices that they are selling for now. This should give you a general idea of whether the house
will appreciate or depreciate in the future.
2. Looking at the Size of the Land
Make sure that the land has good comparability to other lots in the same vicinity. Make sure there
aren’t any obstructions to the lot that will make it less desirable for potential renters or buyers. If the
land is smaller compared to other lots in the area, it may not be as desirable for potential renters
or buyers; however, if the land is larger than that of other lots, it may have great selling potential, or
even subdivision potential – a relatively simple strategy that makes many investors a small fortune.
3. Cosmetic Conditions
You will need to check the internal condition of the property such as paint and siding conditions.
The landscaping should also be a considering factor. Make sure that the inside and outside of the
property is in good condition and looks appealing.
4. Checking for Structural Conditions
Structural conditions are very important to consider before investing in a property. If the structural
conditions of the property, such as plumbing and electricity, aren’t in good condition, it will take
an extra monetary investment in order to fix those problems – these can be anything from a few
hundred dollars to tens of thousands of dollars.
For this reason, a building and pest inspection is
essential to ensure you identify any concerns upfront.
5. Assessing the General Layout of the House
The layout should make sense according to the locations of rooms, such as bathrooms, kitchens,
living rooms and bedrooms. If the layout is inconvenient, it may not bring appeal to potential
buyers or renters. For instance, a four-bedroom home with only one lounge area does not suit the
likely number of residents living in the home…
But a three-bedroom home with two separate living
areas is much more convenient. The position of the house on the block and the lighting conditions
should also be taken into account.
6. Looking for Vehicle Parking
Available parking is a very important aspect of a property. If there is not enough room for tenants
or homeowners to park their car, the house becomes less desirable.
There should also be extra
parking spaces available for visitors. These extra parking spaces may come as an available parking
lot across the street.
7. Considering Curb Appeal
Before purchasing a property, you need to make sure that it is appealing from the outside in. This
does not mean that the property has to be the most stylish property on the block, but it does mean
that it should not look ugly or rundown.
It should at least come in close running with the other
properties on the block. Passers-by should be able to look at the property and notice that it is
pretty and has been kept in good condition.
From Onside Property team happy buying! Should you wish to discuss the above further with any of a sales staff please contact 1300 938 931.
Onside Property Group Sydney - Office Dulwich Hill
www.onsideproperty.com.au
info@onsideproperty.com.au
No comments:
Post a Comment