When it comes to buying an investment property there needs to be a different mindset to that of buying your first home. Your tactics need to be different and the emotional element needs to be withdrawn to ensure you make the smartest monetary investment possible.
Here is a short list of the key elements to look at whilst looking for potential investment properties.
1. Location: Location is important when looking to buy your own home, but even more so when looking to purchase an investment block. The market is driven by demand and if there is a strong element of demand in that area, you will offset some of the risk of your development. Research the location, find out the median wage for families in that area and build a product to suit the area not one that may work in your own home neighbourhood.
2. Land Size: People buy investment properties based on possibilities. The scope of future development and potential for redevelopment is one of the key elements as to why people buy investment properties. Buying a home that is on less than 300sqm can make it tricky to fit more than one. Keep this in mind when buying the block.
3. Permits: Do research, look to find out if the current owner has any plans that have been approved. If they haven't been approved find out. If the house has a covenant preventing a change to adding a story or the frontage make sure you know this before. If a permit was rejected, find out why. Look for STCA when plans are mentioned and follow up to find out if this has or will be approved.
4. Transport: When buying an investment property you have to think in larger scales of demand. It's easier to move properties you have developed when there is strong demand for it. In saying that, building something for as cheap as possible won't guarantee a sale as there are $180,000 1BD apartments 8km from Melbourne's CBD not being sold because they have over estimated demand and not built a liveable product. If the property has good public transport and a car spot, it generally will cater for two people comfortably.
5. Agent advice: Asking an agent for their honest opinion is a good idea. Whilst this can't be held as gospel, knowing what they think is important. Do they think someone will buy the proposed redevelopment or will it stay a single fronted home? Be blunt and tell them why you want to do this.
If you have any tips for buying as an investor feel free to tweet us here.
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