A Word From Howard – What to look for when buying an investment property
Posted by apm on October 11, 2023 Company News, News
Making a successful investment requires careful consideration and due diligence. Howard Morley, apm Director, outlines a few crucial factors to look for when buying an investment property including location, research, and property size/layout.
Investing in residential or commercial rental properties can be rewarding while offering a steady stream of income and potential for long-term appreciation. Making a successful investment requires careful consideration and due diligence.
Whether you’re a first-time investor or a seasoned pro, perhaps the following crucial factors to look for when buying an investment property are nothing new, but they are all still important and I thought worth focusing on again.
Location, Location, Location
The right location can significantly impact your property’s rental income, demand, and appreciation potential. Look for areas with strong economic fundamentals, good schools, and proximity to amenities like shopping centers, public transportation, and healthcare facilities.
Additionally, consider the area’s future growth prospects and overall appeal to potential tenants. These considerations and fundamentals are equally important for commercial properties as you need to think of how staff or clients are going to get to and from the premises. For some commercial activities (such as fast food stores) location will be the number one selection criteria.
I recommend you take time to conduct thorough market research to understand the supply and demand dynamics in the area. Analyse and review vacancy rates, rent trends, and property values to determine if the market is favorable for rental investments. It’s essential to be aware of any upcoming developments or changes in the area that might affect property values or rental demand.
Property Condition and Inspection
Before buying any investment property, have a professional inspection conducted to assess the building’s overall condition, sometimes this will mean employing a professional engineer. Pay close attention to the foundation, roof, plumbing, electrical systems, and any potential structural issues. Identifying hidden problems early can save you from costly repairs down the road. Purchasing the property file for the property from the local authority is no more than a few hundred dollars but could save or add thousands of dollars in value and rents.
Decide whether you want to invest in residential or commercial properties. Each has its distinct advantages. Residential properties often have a more stable tenant base, while commercial properties can yield higher rental income but, if in the wrong location or of a specialist and limiting design, may come with longer vacancies. Your choice should align with your investment goals and risk tolerance. A mix of both is often used by many investors.
Property Size and Layout
Consider the size and layout of the property in relation to your target market. For residential properties, think about the number of bedrooms and bathrooms, as well as the overall square meterage. For commercial properties, assess the available workspace, truck access, parking, layout, and suitability for both present and future potential tenants’ needs.
Rental Income Potential
Calculate the potential rental income and expenses associated with the property. Compare these figures to determine if the property is financially viable and/or will be able to compete with other close by properties. Ensure that the rental income covers your mortgage, property taxes, insurance, maintenance, and any other costs associated with property ownership. Additionally, consider factors like rent control laws and tenant turnover rates in the area.
Legal and Regulatory Considerations
Be aware of building regulations, property laws, and tenant rights. If needed, consult with legal experts and property professionals such as engineers and your Property Manager to ensure compliance with all relevant regulations to protect your interests as a property owner.
A large proportion of businesses and families live in or use rental properties. Supply and demand creates opportunities for both parties and property investment is a long-term strategy. Most of the apm team have been in the property industry for many years. Several have over 15 years’ experience working as property managers. We are always interested to talk to our clients about their thoughts and plans to grow their property portfolios.
Investing in residential or commercial rental properties requires careful planning and consideration so you can make informed decisions that maximise your investment’s potential. Don’t hesitate to seek advice and stay up-to-date with market trends to ensure your investment remains successful in the long run.