The biggest mistake a property investor can make is to treat investment properties like their home.
Homes and Investments are purchased for vastly different purposes. The purpose of buying an investment is to make money. Therefore, every decision surrounding the process of buying the property should be guided by one question: “Will this maximise the financial return this investment will earn?”
Property Investors Use Logic
The first time a person buys a property, it is typically their home. And when buying a home, the process is emotionally driven. There is a big difference between buying a house, and buying a home. People want their home to be a haven. They want it to suit their specific needs, and their specific desires. People will pass up the opportunity to buy an otherwise amazing house, because it’s not the right colour, or it doesn’t have the right kind of floorboards, or a million other tiny reasons.
And that’s fine. Because it’s your home, it’s a place where you are meant to be truly comfortable.
However, because their home is the first property that people buy, a new property investor might think that process is how the purchase of every property works. It isn’t.
The Numbers Matter
When you’re buying investment properties, facts are king. You don’t have to actually like your investment property for it to be successful. You might personally think that living in an inner-city townhouse is dreadful, but that doesn’t change the fact they are proven to be amazing investments. As a property investor, here are some examples of the type of information you should be looking for to decide if a property would make a good investment property.
RENTAL YIELD: What percentage of the property price is earned back every year through rent.
RENTAL PRICE: Self-explanatory, how much you can rent out your investment for.
RENTAL VACANCY: An empty investment earns you no income. Low Rental Vacancy means high demand.
AREA GROWTH: An area with consistent growth means the investment will consistently grow in value.
DISTANCE FROM CBD: An investment property close to a city/large town is usually the best bet.
Buying an investment property is a big deal, and it is far more complicated than just looking at 5 statistics. However, these are a good place to start, and may help you form a more detailed image of what you are looking when you sit down with an expert and begin the process of buying an investment property.