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The number of people investing in real estate is increasing in Sydney, but before the purchase, you need to make sure which property is right for you.
Here are 6 factors it is wise to consider before making the decision about buying an investment property.
With real estate, you have 4 choices: Commercial, Industrial, Retail and Residential. Commercial and Industrial offer a far higher return to compensate for what is frequently a lower capital gain as well as a higher risk of vacancy or non-payment of rent during the more difficult periods of the overall economic cycle. Residential real estate is the safest investment and consequently, has a lower return.
This relates to options such as a Strata home unit, a Townhouse or a house on a Torrens Title block of land. Each has its advantages, as well as disadvantages. In our experience, the majority of investors choose Strata home units or townhouses. These have had an excellent return as more and more people are preferring a lifestyle without the maintenance of a block of land. On the other hand, those who choose a house generally look at the long-term prospects of the capital gain of the property or the potential of increasing the return by building a garden ‘granny’ flat.
You hear this all of the time… that’s because it is very important. Is the neighbourhood safe and secure? Is there easy access to public transport and shops? Is it near schools or a university? The location has an impact on your ability to attract high returns. If you buy your investment in a location considered to be of a low-socioeconomic standard, even though your return will be much higher, you may find a much higher risk when it comes to the quality of tenants.
A good tenant will be attracted to a property surrounded by nice houses with good, quiet neighbours. When it comes to the layout of the home itself, entertaining areas such as an outdoor BBQ in a private covered patio or a balcony are always attractive as is a modern kitchen, bathroom and open house floor plan. If you decide to buy a rundown property, make sure you are aware of what can you do to renovate it, to improve its attractiveness to a good tenant or improve the property value.
When investing in residential property, it crucial to look at it through the eyes of your future tenants. Never forget that your investment property is your tenant’s home and attracting a house-proud tenant will always pay good dividends.
A good tenant is much more than someone who pays their rent on time. We strongly recommend considering not only the rental history of a tenant but also their character and their values. Make sure your expectations are compatible with the people who will call your property their home.
The current market outlook in Sydney is positive for property investors with the all-time low-interest rates, a very low vacancy rate and an abundance of excellent quality tenants.
If you are considering buying an investment property, make sure you know its current market value. IP Valuations is here to help with its independent and professional team of valuers.
Feel free to call us on (02) 9659 5446 or fill in our enquiry form.