I’m about to share with you a conversation I regularly have with clients, friends, dinner companions, whoever’s asking.
This topic that always comes up is why the decision to buy a home as an owner-occupier is night-and-day-different from the decision to buy an investment property.
Selecting a home you plan to live in comes down to a number of factors, namely:
- your preferred lifestyle
- your stage of life
- proximity to family, friends and work
- what you can afford
- land size
- potential for improvement
- personal aesthetics in terms of façade and finishes.
Importantly, it’s an emotional decision. Most people can’t help but get attached and fall in love with places during the process.
On the other hand, buying a home as an investment property is more about securing an asset for the purposes of making money and building wealth. Buying an investment property is an investment in your future – and a good, solid one at that.
Remember that land is the one thing they’re not making any more of, which is why property is always up there among the best investments. Land is always in demand – as are quality dwellings. While consumer behaviour can change so much, people will always need a place to call home. Plus, owning an investment property can have tax advantages (although you do need to speak to your accountant about your financial position and what specific tax advantages may apply to you).
Give the people what they want
When choosing an investment property, you have to put your personal feelings aside and concentrate on facts, figures and gut instinct (this time in a business sense).
The first time people buy an investment property, it’s easy to fall into the trap of searching for a place you can see yourself living in or lovingly renovating it to your own standards. This mindset can easily cause newbie investors to ignore a property’s downsides or invest in finishes that your average tenant won’t appreciate/won’t withstand the natural wear-and-tear of transient residents. You have to remove emotion from the equation and be clear-minded about where’s the in-demand rental areas are and what tenants would expect from a property.
These expectations generally revolve around:
- Public transport
- Multiple bathrooms
- Nice new paint
- New carpet
- Outdoor area of some description
Does it tick all the boxes? A buyer’s advocate can guide you through the selection process and keep you on track.
Who’s your target market?
It’s essential to think about what kind of tenants you want to attract. Students? Young professionals? Families? There are pros and cons for each. Young professionals sound ideal, but the properties they want to live in tend to be in areas that are more expensive. Families are generally fabulous to rent to because they’re stable tenants who stay put. On the downside, young kids are rough on paint and carpet.
The advantage of students is their expectations are relatively low, but their leases tend to be short and they have loud parties. See what I mean? All of this requires a risk/benefit analysis.
No money pits please
Whoever you rent to, it’s ideal to find an investment property that’s low-to-no maintenance. A crumbling old place that constantly need repairs will frustrate tenants and deplete your bank balance. A modern or renovated place may not give you as much grief. This is why property managers are totally worth it if the price is right and your dealing with someone you trust.
If you’re gearing up to buy an investment property, I encourage you to get in touch with either myself or a trusted buyer’s advocate in your area.