Location
The location of the property is one of the main things that you will want to think about when it comes to about investment properties. This is because the location of the property will be one of the main contributors to the appreciation of your investment.
A lot of people don’t understand that the land that the house is built on is one of the main factors that influences the price of the property. For example, let’s say you have two identical properties that are exact the same build, land size and age. Your first property is located in Liverpool and the second is located in Randwick. Liverpool is located 39 kilometres from the Sydney CBD and 36 kilometres from the closest beach, whereas Randwick is located 8 kilometres from the Sydney CBD and 2 kilometres from the closest beach. In 2022, the median house price in Liverpool was $962,000, whereas in Randwick, the median house price was $3.6 million. As you can see, the location of property is one of the main contributors to the property’s value. Always think location first, and the property itself second.
There are a few key things you should be looking for when it comes to real estate location. These include:
Distance to major cities and coastlines: The closer your property is to either a major city or coastline, the better. A property in an area that is close to both would be even better! Note that your ability to purchase a property that is close to major cities and coastlines will be highly dependent on your budget, as obviously these will come with a higher price tag.
Distance to local schools and daycares: Proximity to schools and daycares is a great selling point to potential tenants, particularly families with young or school-aged children.
Ease of accessibility to local public transport: Just over 30% of Australians use public transport as their main method of travel to work each day. Having an investment property close to public transport gives tenants that additional option for travel each day, and is definitely a positive for the property.
Lifestyle attractions: Areas that offer lifestyle attractions are favoured by buyers and renters alike, when compared with other suburbs that offer fewer amenities. Examples of lifestyle attractions include walking tracks, large family parks, bushland, creeks, beaches and small community villages. All of these things offer unique points of difference.
Local supermarkets and shopping centres: Being close to supermarkets and shopping centres makes it easier for your tenants to run their day-to-day errands. Being able to quickly stop in at the local supermarket to buy food is simple and convenient, and always a big plus for any property.
The surrounding suburbs: Always look at the surrounding suburbs before picking a location for your investment property. For example, have the surrounding suburbs had a recent price increase? Is there a lot of new development in the surrounding suburbs? What is the demographic of people in both your suburb and the surrounding ones? These are all questions that need to be answered before choosing your investment location.
Quality of the build
The structural and internal quality of the property is a very important thing to check before making an offer. There are a number of things that you should be looking for during any open inspection, including:
Water stains and mould: Look at the walls for any signs of moisture penetration or water leaks, especially near showers and baths. This is not a structural defect, but can be costly to repair.
Sagging ceilings: Look at the ceilings to see if they have a parachute-like appearance. This can be done by shining a torch across the ceilings, which will show up all deflections and defects in the ceiling sheets.
Damp, mould and mildew in cabinets and storage spaces: Look inside all cabinets and storage spaces in wet areas to check for signs of damp, mould or mildew. Any damp smells can be an indication of water leaks, or even rising damp.
Large cracks: The internal and external walls should be checked to see if there are any large cracks present. Properties with a large number of cracks greater than 2.0mm in width are cause for concern, and should be further inspected by a qualified building inspector.
Fine cracks: The internal wall plastering can be easily checked for fine hairline cracks (also called map cracking, as they take on the appearance of a map). These cracks are caused by the incorrect application of wall plastering at the time of construction.
External roof lines: Look at the lines of the roof to check that they are straight and free from deflections.
Rust in the roof gutters: The roof gutters may look great from ground level, but checking them from their top side may reveal them to be corroded and in need of replacement.
Whether the roof downpipes run to storm water drains: Do a quick walk around the external perimeter of the home to check that all roof downpipes are discharging into stormwater soak wells, and not just onto the ground. You should also look for any signs of past flooding or excess water flow around the roof downpipe bases, as this often indicates that the soak wells are not suitably sized or require cleaning out.
Functionality of all appliances and fixtures: Ensure you check that all internal and external appliances and fixtures are in good working order. This includes ovens, rangehoods, lights, taps, and so on.
Missing these key things could be a quite costly mistake in the long run. That’s why, in addition to all of the above, getting a pre-purchase building inspection is highly recommended before you commit to purchase any property. Pre-purchase building inspections will be explained further in future lessons.