Finding an investment-worthy location may seem as simple as selecting one that provides good rental returns. Unfortunately, it’s hardly ever that simple. That’s why today, we’re exploring some of the factors that truly make an area investment-worthy.
What Local Agents Are Saying
This may seem like an odd point to include, but as real estate agents have access to behind-the-scenes information about the rental market in any given area, their opinions can be valuable.
You’ll obviously want to employ the services of a professional property investment consultant rather than simply asking any random agent, but you’ll find their expertise to be quite helpful.
Vacancy rates, for example, aren’t always easy to find. Meanwhile, discovering early on that an area is prone to attracting tenants who damage properties is far preferable to learning this grim news when you’re quoted sky-high landlord’s insurance premiums.
Another factor to consider is the future development of the area. While rental returns may be strong at present, you want to ensure that your investment is going to continue providing good yields while also appreciating in value. If an area is showing promising development, this usually means that property prices (and in turn, rental rates) will increase.
This is why properties in up-and-coming suburbs can make for better investment opportunities than those in already well-off areas that are no longer growing. Of course, this isn’t always the case, so make sure you crunch the numbers and consult a professional if you’re unsure.
While the school district that an area falls into may not seem all that important to those who aren’t purchasing as owner-occupiers (or those without children), the catchment area that your new investment is sorted into can have an impact on your rental yields and future property valuation, so it should be considered when deciding which location to purchase within.
Proximity to Employment Opportunities
Likewise, the proximity of your new property to strong employment opportunities will also affect how well your investment performs. Because of this, a multi-factor approach needs to be taken. A good school district isn’t going to be too helpful if there’s nowhere for mum or dad to work, but by the same token, good employment opportunities don’t mean much if potential tenants will have to travel a significant distance to take the kids to a good school.
Your Ability to Comfortably Manage the Property
Finally, even a “perfect” suburb becomes undesirable if owning an investment property in the area causes more stress than it is worth. Many investment properties fail to make their owners money for quite a long time, and you need to be prepared for the fact that yours may very well be one of them.
As the saying goes, “hope for the best, but expect the worst.”
In real estate terms, this means ensuring that you have the cash flow needed to keep both your current lifestyle and your new property afloat if it becomes a drain, rather than a boost, on your finances. It is also important to consider the tax implications of your new property. This can be a major factor when it comes to managing your budget with your new investment, so if you’re unsure how things will play out in that department, be sure to consult a tax accountant.
Although the advice in this article is general in nature and won’t be true for every instance, the overarching factors will have a significant impact on the potential return of an area, so they are always worth considering.