What to consider when investing in property

Property can be a great investment. While having your own home can be rewarding, having an investment property can provide you with great financial gain. With the right amount of research, a property can create ongoing income as well as increase in value over time. However, as it’s such a large investment, there is a lot you should consider before you invest any amount of money. The wrong investment can leave you in a financially vulnerable state, meaning you could find yourself in a much worse place financially than you were before any such investment. Here’s what to consider when investing in property.

Understand property

One of the first steps when investing in anything is to understand the asset and the market it’s currently in. There’s a range of different investments one can make, each with its own trends and characteristics, as well as ways of creating wealth for the investor. The property market has been known to fluctuate both gradually and radically, and is dependant on things like location, supply and demand, and the current state of the economy.

Before you invest in a property, be sure you know where and what is in demand. For example, some areas might have an oversupply of new houses, while others might have a shortage of apartments. This can mean that houses might be relatively cheap and apartments relatively dear. Whatever the case may be, it’s important to know what the future holds in terms of growth in the area. If there’s due to be high growth, a house in this situation may gain considerable value down the track. Of course, this is a simplified scenario and you should seek professional advice before making any decision.

Alternatively, you should also research what is currently appealing to homebuyers and renters. You want to purchase a property you like, but more importantly, one that will appeal to future tenants. Consult experts and search online for what type of properties are highly sought after. Use this information as a rough checklist when you begin your search.

Another thing that you must understand before investing is home loans and where to find a competitive rate. Using sites like RateCity can help you compare lenders and find an interest rate that works for you.

Location, location, location

As we briefly mentioned, certain areas will offer different opportunities when it comes to investing in property. Essentially, an appealing area that’s set for healthy growth in the coming years may make a good candidate for investment.

Tenants will look to live where they have easy access to a whole range of amenities such as shopping facilities, public transport, schools and other lifestyle and entertainment options like restaurants and beaches.

The price

The price of a property is obviously one of the most important factors to consider when making an investment. Before deciding on a property, you must ensure that the price you are paying is justified and your future rental repayments will deliver an acceptable rental yield, which is similar to a return on your investment. Don't assume that more expensive properties guarantee a bigger yield - sometimes they do, sometimes they don’t. Again, make sure you do your research and get professional advice.

An existing property, or off the plan?

There’s no one right answer when it comes to purchasing an existing property or one from a plan. There are a lot of variables and either option can result in a win or a loss for the investor. In saying that, there are certain things you can do to minimise risk.

When buying an apartment or house off a plan, it’s important that you research the developers and builders. What have their previous properties looked like, both in physical terms and in investment returns?

An existing property will be significantly easier to research as the previous property managers should be able to update you on the history of it. Research things like vacancy levels, how long the property has been listed on the market, its rental yield and its previous market history. In both instances, find out as much as you can.

Investing in property is a huge commitment, however, with the right research it can be profitable. Doing your due diligence and ensuring the property you purchase is in an appealing area set for growth will give you the best chances of investing in a successful property asset.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.