6 Things to Look for in an Investment Property

Developing an eye for high-performing investment property means understanding the factors that drive rental demand and capital growth. 

For those starting out in property investment, determining where to invest is a big decision. To help guide your decision-making, we’ve put together a list of the six things to look for in an investment property, and what each means in terms of performance.

Keep in mind that these are tips, not rules – always do your research before committing to an investment.

What To Look For In An Investment Property

1. Property Location

Property location is one of the most important factors - both the suburb's performance and surroundings are important considerations for property investment.

Suburb real estate performance data provides insights into the location’s current property trends, median prices, and vacancy rates. Market indicators outline the investment potential of properties in the suburb or region.

The property's surroundings should also be assessed for proximity and accessibility to amenities like shops, schools, and lifestyle facilities. Public transport options, planned infrastructure, and ease of commuting are signs of a well-connected area that will naturally appeal to a broader tenant base.

Consider the long-term development of the suburb. Local council development strategies can reveal if an area is set to experience growth or gentrification, which can increase property value over time. 

2. Property Type

Consider the type of tenants the property is likely to attract. The age and income of tenants can impact the amount and consistency of rental returns.

For example, an apartment near a university will be rented by students, while a three-bedroom house in a suburban neighbourhood close to schools will attract young families.

3. Property Condition

Properties that are in poor condition are more likely to incur higher maintenance costs down the line. 

Older properties in poor condition are also less likely to attract tenants - especially if the damage is cosmetic and obvious during inspections. Arrange a building and pest inspection to uncover any hidden issues with the property.

Building inspections provide a clear idea of the work required to prepare the property for tenancy. Minor fixes, such as broken cabinetry, can be easily replaced, but major problems with the property’s structure or systems (electrical, plumbing) may require a costly and extended repair period. 

Newly built properties are ready for rent and will attract tenants faster. A newer build may also offer a warranty period to reduce the cost of maintenance early on. New property investments include off-the-plan purchases, house and land packages, and custom-built homes.

4. Property Age

In Australia, property owners can only claim depreciation on a property for a period of 40 years; an older home will not offer the same tax benefits as a new home. Investing in a new build offers investors a longer depreciation schedule to make claims, increasing the potential tax savings and widening the margin of returns. 

5. Property features

Features that add value to the property include parking/garage, additional bathrooms, outdoor areas, storage, air conditioning, and a dedicated laundry space. In areas where street parking is limited, off-street parking on the property can significantly enhance the property's appeal. Choosing property that already has these features will also lower future costs for upgrades and increase the immediate rental appeal.

6. Rental Demand and Yield

When researching the area around the property, look for statistics that determine local rental demand. Statistics, such as the ratio of renters to homeowners, represent the rental demand the property is likely to have. A high percentage of renters in the area could signal strong ongoing demand - it’s worth looking at the rental supply too to ensure that the market is not oversaturated with options. 

Rental yield is another data point to consider. The average rental yield of properties in a location shows how much return investors can expect, relative to the purchase price. A high rental yield is more likely to provide a positive cash flow, especially in the early years of investment.

Knowing what to look for in an investment property can ensure you're making the right investment. At Builder Direct, we’ve done the research to make it easy to find the right property to invest in. We offer house and land packages for investment in Townsville, Cairns, and Mackay - each property is handpicked for a high investment potential based on market trends, future developments in the region, and rental demand.