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What's the best type of investment property

What are the best types of investment properties?

March 9, 2018 8:00 am by Upside

About to make your first foray into buying an investment property? With so much out there to choose from, it can be extremely difficult and confusing to decide what to invest in. Here’s what to look for when buying an investment property:

Should I buy a house as a property investment?

If you’re considering buying a house, consider the following advantages and disadvantages of owning a home as an investment property:

Pros:

  • Autonomy over the property
  • Attractive to families and student sharers
  • Possibility of renovating/enlarging
  • No strata/management fees

Cons:

  • More to maintain (i.e., yard, garage)
  • No on-the-ground assistance from body corporate/strata managers
  • Typically requires larger deposit than apartments since most lenders require a lower loan-to-value ratio for investments

Should I buy an apartment as a property investment?

There are plenty of pluses and minuses to buying apartments as investments, too. Here are a few considerations:

Pros:

  • Some maintenance and admin is taken care of by strata management
  • Less upfront investment needed compared to a house
  • Likely to appeal to young professional sharers, international students
  • Smaller deposit required on average

Cons:

  • Depending on the market, it could be harder to fill: Sydney and Melbourne, for example, are experiencing apartment booms
  • No chance to extend or enlarge the property in the future
  • Potentially less capital growth than a house

Is it ready to move into?

If you’re going to be renting out a property, be sure that the property is in good repair by conducting a thorough property inspection. Unless you’re an experienced investor or renovator – or any repairs are minor, like repainting – it’s safest to buy a property that’s ready for tenants.

young renters moving in
If you're thinking of renting out, consider whether your investment property is ready for tenants to move in.

Is it somewhere renters want to live?

If you’re trying to decide where to buy an investment property, the first thing to ensure is that the prospective location is somewhere with plenty of demand for rental properties. You can do your investment property research by reviewing rental property listings for comparable properties in the neighbourhood. Typically, property investors look for rental properties that are:

  • Within easy reach of areas of employment, like hospitals, large shopping malls, airports, business districts or army bases
  • Student accommodation near universities
  • Quality apartments near the city/business district for young professional sharers or couples
  • If it’s a family home, close to desirable schools, parks, shops and other facilities
  • Close to public transport

Will you be taking care of management or outsourcing?

This is a crucial question to help you make investment choices. If you prefer being a hands-on landlord, buying an investment property that’s relatively close to where you live might be a good option. If you’re planning to outsource the management of the rental, this means you can open your search out to more distant locations.

Checklist: What to look for in an investment property

  • No major renovations required to make it habitable. Obtain a property report from the vendor, if one has been commissioned, to ensure that it’s structurally sound
  • Appliances – water heater, stove, fridge, dishwasher, washing machine and dryer (if applicable) – in good working order
  • In a desirable location near transport, schools/universities, and employment
  • Good potential rental yield based on comparable properties in the area

If you’re considering buying an investment property for the first time, a great source of information is the Department of Fair Trading or Consumer Affairs in your state.

No matter whether you’re buying to rent it out, or to resell for a profit, a good place to start is with an online property value report. Get to know which properties are worth your time and investment in just 30 seconds, with essential information such as sale history, suburb data and comparable sales in your hands!

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