Choose the questions you want to ask and you’ll be well on your way to becoming an expert in buying an investment property.
Step One: Research the Area
What projects are happening in the area? What is the suburb’s median price and what is the property currently returning in rental income? If the focus is on capital growth, what makes the street, suburb, town or city a good growth area? What are the current average days on market for a property in the area? What is the percentage of renters in the area? Is the property in a known flood zone? What is the vacancy rate in the area? What are similar properties in the area selling for? Has there been property discounting occurring in the area? What are the auction clearance rates of the area? What is the population growth forecast in the area? Is the trend of selling property by private sale or at auction? Is it a buyers’ or sellers’ market? What is the neighbourhood like?
Step Two: Research Your Rental Demographic
Does the local industry have expected wage growth? What kinds of properties match the local demographic: houses, units, townhouses or apartments? Would tenants pay more for a pool? What rental price do you think the owners would accept? What type of person or tenant would live here? Would tenants pay more for the property to have air conditioning? What is the current market rent for this type of property?
Step Three: Decide What it is You’re Looking For
How many bedrooms should a property in this area have: one, two, three, four or more? Should it have a rumpus room and/or an alfresco entertainment area? Should it have a single or double garage? Is the value better in an old or new property in the area, to achieve the greatest profit? Should it have one, two or three bathrooms? Should it be single level or multiple levels? Is adding value to a property better to do now or later, and how should this be done?
Step Four: You’ve Found a Shortlist, now it’s Time to Dig Deeper
How long has the property been on the market for? Have they had any offers so far? What fixtures and fittings are part of the purchase and what aren’t? Are there any covenants, caveats or any regulatory impositions on the property? Are all works done on the property permitted? Is there a recent valuation or building report? How motivated to sell is the vendor? Are the foundations structurally sound? Are there signs of internal or external damage that has been covered over? Does the vendor have a building report? Can I get vacant or early possession? Will the vendor take a small deposit? Is there anything I should know about the property? Why do the owners want to sell?