How to pick a winning investment property
Buying an investment property is very different to buying your own home - it's not about what you like, it's about what the tenants want.
The last thing you want is a property that's difficult to rent.
You also want to minimise your overheads and potential headaches.
Here are five tips to choosing a winning investment property:
1. Choose apartments.
"They're less headache," says Matt Lahood, director of sales at McGrath Estate Agents.
"You don't have fences, roofs, all the stuff that can go wrong.
"With an apartment, you can lock it and leave it."
They're also easier to rent because the rent is cheaper and tenants tend to stay longer than they do in houses, he says.
John Edwards, founder of residential research company Residex, says houses are better investments "because the land appreciates more than a depreciating building", but can create more headaches.
"There are disadvantages in owning a house and advantages in owning a unit. But, at the end of the day, the one that's going to produce the best growth rate, and probably even the best rental return in net terms, is probably the house," he says.
"But the one that's going to provide you with the least amount of headache and the lowest level of land tax is the unit."
2. Two bedrooms are ideal.
"If you've got a two-bedroom apartment anywhere in a salubrious part of a main capital city, close to infrastructure, you're going to attract tenants for sure," Mr Lahood says.
3. Old is better than new.
"My advice, particularly to new investors, would be don't buy brand new apartments, full stop," Mr Edwards says.
"You never make as much money in capital growth terms out of a brand new unit as you do out of a second-hand unit.
"Buying off-the-plan, it's unlikely you're going to get the price right and you can't be certain that the amenities you think you're buying, you're going to actually get."
4. Forget the bells and whistles.
"Look for buildings with low overheads - a three-storey walk-up building without a lift is desirable and they're easy to rent," Mr Lahood says.
"Pools, saunas, tennis courts - those things need a lot of upkeep and while they might seem attractive to some tenants, it won't make a big difference to the rent but you'll have a lot of overheads."
Most tenants are interested in affordability and convenience.
There is a market for executive tenants but it's limited and not something you can bank on, Mr Lahood says.
Mr Edwards advises buying in complexes with no more than 50 units.
"When you're renting or selling, you don't want competition and when you've got a very big block, you're likely to have somebody else doing it at exactly the same time as you're doing it, so that's not a good idea," he says.
5. Don't skimp on the essentials.
Look for some form of off-street parking, Mr Lahood says, and if your tenant doesn't have a car, consider renting the car space to someone else.
Other popular features that will help rent the property are storage and an internal laundry (or any internal space where you can put a washing machine), he says.
Aspect is also important.
"It's always nice to try and find a bright apartment - north is the coveted aspect but next best would be east or west," Mr Lahood says.
