What Makes a Good Property Investment?

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Thinking about buying an investment property? Then how do you decided on the property? What do you take into consideration? There are some very good investments to be made, provided you stick to the rules!

Property values in Perth have effectively remained static since the boom of 2006/2007. Whilst values in some suburbs such as Mount Hawthorn, North Perth, Leederville and Joondanna have held their own since then, quite a few properties in the other suburbs have fallen in value.

Interest rates have been at their lowest level since 2009, and property values are down or static.

This factor alone can see investors re-enter the market.

Owning an investment property sounds like a good idea and we know that an investment in bricks and mortar can be rewarding over time, however, there are a few questions you need to ask yourself before going down the property investment road.

If you are looking for a quick capital gain within a short period of time, say a couple of years, then you will probably be disappointed. Ask yourself how long you intend to hold the property. If it is less than 10 years, it may be risky.

Do you have sufficient income and job security to service any shortfall on the loan repayments should the property become vacant for any length of time or if weekly rents fall? You never know when your job may be on the line in these uncertain economic times. Just ask some of the many workers being laid off in the ‘boom and bust’ mining industry!

Do you have sufficient deposit, and/or equity in another property? Often equity is not enough to secure a loan and some cash deposit may be required by your bank. It is always a good idea to investigate your financial options before you start.

So assuming you are satisfied with your answers to these questions, here are some tips to finding that good investment property:

• Look for property where the main market is, namely the major capital cities. Certainly you may be able to get large rents in mining towns in ‘boom’ times, but these are the exception, and the ‘bust’ part of the cycle in the mining industry is when these markets tend to crash.

• Look for suburbs where there is a reasonably high turnover of stock. This means there is demand in that particular suburb and you will always a have a buyer if you need to sell in a hurry.

• Having identified several such suburbs, go for the suburbs which have achieved at least reasonable growth over the past 3 to 5 years. The history of growth rates over a period of time is usually a good indicator of what the future holds.

• Having decided on a suburb you next need to decide, depending on what stage you are at in your working life, if rental income or capital growth is your main priority. You don’t usually get high rental income as well as high capital growth in the same property.

• Finally, watch your borrowings. Nothing kills a property investment like having to sell in a down market because you can’t afford the repayment or you’ve lost your job!

To help you further we’d like to give you our book called ‘The Property Investor’s Guide to Profitable Property Management’ – click on the image below to download.

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About Gai Kroczek

Gai is the Owner/Manager of Total Care Property Management together with Bernie Kroczek of Bernie Kroczek Real Estate. Gai has been in Real Estate for over 20 years and runs a professional Property Management team utilising the latest technology to assist owners in maximising their investment while also assisting tenants.

Gai is also the web designer and maintains all the office technology keeping abreast of all the many changes and implementing them to make sure our owners get the best possible service.

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