Buying an investment grade property – Part One

Written by view.com.au in Buying on June 4, 2013

Buying an investment grade property – Part One

Many investors become confused when it comes to purchasing an investment property. What characteristics constitute an investment grade opportunity? As a buyer’s agency we have sold over 2,000 investment grade properties for our clients. So, what features contribute to an investment grade property which ensures tenants are queuing up to lease your property?

 

Location, Location, Location

Some investors are lured by cheap and affordable properties overseas or interstate.  But it’s important to remember the three golden rules of property investment – location, location, location.

The property should be walking distance to a train station. As populations grow, commuting becomes a key concern for people. Everyone wants easy access to public transport and central business districts.

An investment grade property should also be a short walking distance to lifestyle attractions. Consider cafes, shops, parks, beaches and any other positive amenities such as shopping centres, restaurants, and bars. Check out a property’s walkability or walk score on walkscore.com. It rates a property on a scale of 1 (car dependent) to 100 (walk everywhere). If the score is less than 75 you should consider another property.

 

Carparking

An investment grade property should have at least one carpark allocated. A majority still use cars, even if they don’t use them to commute to work on a daily basis. Ideally, the carpark will be “on title” and have secure or undercover parking.

 

Security

Do your homework on the crime rate in the areas you are looking to purchase in. There may be certain streets in the area  with higher crime rates. Properties that have high security gates and fences and / or security intercom systems and alarms will be preferred by many tenants.

If you wouldn’t want your daughter living there, then you should choose a safer location. When buying apartments, avoid ground floor apartments that are more accessible to break into and choose apartment buildings with secure gates and a security entrance.

 

Street appeal

They say you only get once chance to make a first impression when you meet people, and the same is true when a tenant first sees your property. Many tenants will use Google maps “street view” to check out the street appeal of your property and could rule it out instantly if it is not a quiet residential location.

If the property looks shabby or rundown from the outside, many tenants will put your property towards the back of the queue. Be careful of buying properties on main noisy roads or properties adjacent to freeways or other negative amenities such as backing onto train lines, bus or tram stops, petrol stations, factories or schools.

 

Orientation and light

Get the compass application out on your ‘iPhone’ and make sure the living areas are facing north or north-west as most tenants prefer to live in “light and bright” properties that are more energy efficient and are naturally light all year-round without having to have the lights on all the time.  Avoid south facing properties and properties where the living areas face east as they will only receive brief morning sun or light

 

 Aspect and views

Tenants will always favour properties with appealing views. Properties that overlook attractions such as the city, water, parks and gardens will always have a certain “WOW” factor that sets them apart.

Many investors buy a property because it is “cheap” but it will always be cheap when they go to sell it too.

A savvy investor instead focuses on a quality property with views that you will always pay a bit more of a premium for, but it will be one that will usually achieve higher capital growth, better rental returns and shorter vacancy periods.

 

Make sure your investment property ticks the investment grade boxes

Buying an investment grade property is about focusing on the criteria above to give your property an edge. It will remove that stressful situation for landlords of having a rental property vacant and needing to attract a new tenant.

With Melbourne’s rental market easing and the rental vacancy rate increasing by 43% (from 1.6% to 2.3% vacancy) and more than 25,000 new properties set to hit the market in the next year, it will become even more important to choose an investment property that ticks most of the boxes.

Part Two of this article will look at other Investment Grade criteria which will ensure you choose the right investment.

 

This article has been written by Frank Valentic, Director of Award Winning Buyer’s Agency Advantage Property Consulting. Frank is now considered one of Melbourne’s trusted opinions in all aspects of property.