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How to Choose the Perfect Property for Your Investment Goals

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The real estate space is a rapidly growing industry. It has an incredibly high-income potential, but it also comes with an exorbitant price tag that prices out many would-be buyers.

Making the wrong decision can be devastating, as property owners could end up with an illiquid, debt-accumulating property with little revenue generation.

Given this, being selective and thorough when buying a property isn’t only a suggestion—it’s a crucial element embedded in the entire property-buying process.

If you want to ensure that you’re getting the bang for your buck with your next property investment, you’re in the right place. 

We’ll cover six critical considerations prospecting investors should make to help them pick the best property in alignment with their investment goals. 

1. Clearly Define Your Investment Goals

Unless you have more cash than you know how to deal with, you should be methodical when selecting a property investment. Sit down and reflect on what you want to gain from your upcoming property purchase.

Do you want to renovate a house and resell it in the short term? Do you want to hold onto it and get rental income out of it? Do you want to hold onto it and flip it in a few years when the market appreciates?

Get an answer to your question and work towards finding a property that fits your specific investment goal. The ideal investment property is not a monolithic entity, but something that matches your vision for it.

For instance, if your goal is to hold onto a property and sell it in the long term, then you can consider narrowing your search to up-and-coming suburbs and neighborhoods. If your goal, on the other hand, is to get rental yields, then you may want to look into apartments in urban areas.

By clearly defining your goals, you can make the most out of your property and increase your chances of reaching your perceived real estate investment goals.

2. Pick A Fitting Property Type

Properties can come in various shapes and sizes, both literally and figuratively. Your ideal choice, for instance, can be empty grassland with zero signs of development or it could be an abandoned factory. It could also be a quaint cottage or a sprawling mansion, depending on your needs and vision. Regardless of the property type, it’s essential to consider the forgotten details when building a house, such as proper insulation, drainage systems, or even optimal window placement for natural light. Overlooking these small yet critical factors can lead to bigger issues down the road.

Before picking a property, clarify what your vision is for it. A big part of picking the right property type is knowing its inherent utility. This utility will influence your choice by helping you determine if the property aligns with your overarching investment objectives. 

The five main property types that you can consider include residential, commercial, industrial, retail, and mixed-use. Housing units are the easiest types to monetize and are ideal for those starting out. 

However, if you found a good deal for a commercial or retail building within the city center, then you can consider choosing that instead.

Essentially, you need to understand the purpose of your intended property before committing to a purchase. By doing this, you can achieve your investment goals more assuredly and maximize your real estate’s value. You can read Westpac’s investing in property guide for more useful insights.

3. Evaluate The Property Price and Value

A major consideration you should factor in when picking a property is its price. 

Don’t just automatically assume that the cheapest property in your local community is the best investment in the area. There could be significant problems with it, like a weak structure or flood-prone location, that may be the reason for its lowered price.

Instead, weigh the property’s price in relation to its overall offering. Consider whether the property justifies its price by looking at its condition, size, income-generating potential, negotiability, and other related factors before making a decision.

Furthermore, make a comparative market analysis to know if there’s actual demand for properties within the area. If the property has been listed for years with no buyers, it could be a sign that the property or area may not be the most suitable for income-generating potential.

You can, of course, perform your own independent market analysis to gauge the feasibility of the lot’s profitability. The real estate market has a few players considering its price, so as long as you make rational assessments, you could score on a high-value property with some tweaks to the original property. 

4. Evaluate Property Floor Plan and Condition

If you’re buying a property with a structure already on it, then thoroughly inspect and assess that property’s condition. The property could look nice in pictures, but hidden underneath could be some structurally unsound materials that may pose a hazard risk to new tenants. Get an inspector to make a thorough assessment of it.

Furthermore, look at the floor plan and assess whether your property goals align with it. If you have to undergo pricey renovations to get the property fixed and resold, then you may have to consider another pricier but ready-for-market property instead.

That said, assessments don’t stop there. If the floor plan and building condition look good, calculate how many rooms you can feasibly add to the property. An increase in tenant occupancy can increase profit yields, so definitely take that into consideration.

Furthermore, assess how much you’d need to spend to do some minor renovations to improve the building’s finishes. If you don’t have to spend too much to make your building look nice, then that’s a plus to the overall decision of buying that particular property over others.

5. Consider The Location and Demographics

There are a lot of properties for sale in real estate marketplaces, but the fact of the matter is that not all of them are good investments. One primary reason for this is because of the subpar location of the property.

Location is a significant and influential factor in determining a property’s overall value. If the property is not accessible by road or is in the middle of nowhere with no nearby facilities, it could be a bad idea to invest in it. 

Even if the house is located in a suburb, a poor community reputation could make it challenging to sell or attract tenants. In this respect, the demographics and social class of the area play a significant role in influencing property saleability.

Conversely, if the property is situated in a prime location, say within a few minute’s drive from a major city, then that’s a good time to jump on a purchase—assuming that the price is right. In essence, you should think like a buyer and consider their needs. 

If the property is situated in a less-than-ideal location, it could take a while to sell the property. So keep that in mind when picking something that may seem like a deal at first glance.

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6. Determine The Property’s Profit Yields

At the end of the day, you’re buying the property not to live in it, but to generate some returns from it. You want to ensure that you’re making the right investment decision—and the only way to know for certain is by calculating its return on investment.

If you intend to charge rent to your property, then you should subtract monthly overhead and fixed expenses from the total monthly rental income. You can base rental income on nearby local competitor’s rental fees.

If, from the calculation, you’re retaining a good amount of money each month, then you could conclude that this property purchase is a good idea for long-term profitability. 

Conversely, if you intend to hold onto the property and sell it once it appreciates, ensure that the location you’re investing in is a rapidly growing economic or residential zone. You can assess this by looking at year-on-year developments and online statistics on the number of people moving into the location.

In most cases, properties in growing cities will appreciate and grow in value. By evaluating a property’s profitability, you’ll know for certain the degree of profit you can reap from your investment over time—which allows you to plan for future investments and business decisions in turn.