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5 tips on choosing the right residential investment property

Ever heard the saying “the best time to buy property is yesterday” and wondered why? Or “investing in property is safer than shares”? Derek Whitcombe, Director of Residential Project Marketing at Colliers International provides insight into why many choose to invest in residential property instead of the stock market and gives his top five tips on how to choose the right property to invest in.

Derek says that due to the nature of property and the property cycle, it makes sense to invest in property as early as you can; bearing in mind that your personal circumstances need to be right.

“Throughout the property cycle, property values go through three stages – the growth/boom stage, the slump stage, the recovery/correction stage and then the cycle starts again.

“With the new cycle we see the value of property grow and typically see this asset class appreciate far more than the previous cycle, therefore in the long-term you would expect to see significant capital growth’, he said.

So here are Derek’s five tips for choosing the right residential investment property.

1. Know why you are buying
Are you looking to buy an apartment to rent out now but live in when the kids have moved out, or are you simply looking to improve cashflow or build equity? When looking for an investment property, don’t lose sight of your reason for buying as it will help you hone in on the right property to meet that need.

2. Know your budget
Knowing your budget will dictate where you can afford to invest. Visiting a lender or mortgage broker can help you determine your budget and obtain a pre-approval.

3. Choose the right location
To get an initial list of suburbs, visit the popular listing website in your state and search for properties that fall within your budget. Now look at each suburb in more detail. Although looking at historic data is important, infrastructure drives property prices, so find out which areas are likely to benefit from new infrastructure as these suburbs typically see better capital growth.

4. Pick the right property type
Do some research before deciding whether to buy an apartment or house. If you’re looking for solid rental yield then apartments are typically the way to go, but if capital growth is what you are after then a house is probably a better option, but this isn’t always the case. You also need to consider the ongoing costs of a house versus an apartment. Factor in things like rates, strata levies and so on.

5. Know who’s likely to rent your property
Put yourself in the shoes of your potential tenant because what a family will look for in a rental property will be very different to retirees, students, young couples and so on. Think about what would appeal to them about the location, the features of the property and/or complex.

Buying an investment property can have significant benefits, but it’s important to consider these facts and talk to your financial adviser to determine how this will fit within your financial strategy.

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