Understanding what creates value in a house is the first step to choosing the right investment property. To get ahead you need the best team, including a mortgage advisor that’s also an expert in property.
Good properties are hard to find – you will have to make offers on a lot of places and take a look at even more. You want to look at areas where the vacancy rate is low, so you don’t have to worry about having the place empty while you look for tenants. And you’ll want to make sure the area you buy in is growing in value – so your money will come from capital gains as well as rent. Either look for a place which is in good condition or be willing to spend money on doing renovations – and be sure of getting a return on the money you spend on doing that work.
Most successful investors have multi-income properties with 2‐3 incomes per property. This is where you will find the best yields for a number of reasons:
- The property will probably have compliance issues you can fix. The seller will often have never intended to sell the house so didn’t bother getting it compliant.
- They might be facing cash flow issues so are motivated sellers.
- Multi-income properties will only appeal to other investors, which is a smaller and more rational market.
- Pricing is rational. The price should reflect the yield and most investors expect net yields in metro locations over 6%, which is a gross yield of 7.5%‐8%.
Home and incomes
A granny flat under your house can be an easy way into property investment. They make sense on so many levels and can also help you buy in an area you might not otherwise afford. It’s a great idea to look for actual grannies to live in your granny flat. They tend to value the security of having a family close by, are reliable and quiet and much more tolerant of family noise than other types of tenants.