Finding the right investment property

The importance of planning

Ever heard the saying ‘Fail to plan, and you plan to fail’? While there’s no silver bullet solution to finding the right property, it’s a good idea to start your search with a solid strategy.

• What kind of property do you want to buy?
• Whereabouts are you going to look?
• What sort of cash flow suits you?
• What’s your budget?

Unfortunately many investors don’t have a fully formed plan when they start house hunting. They’ll have an idea—of course—but they haven’t worked things through thoroughly.

Use these five tips to find the right investment property for you.

1. Understand cash flow

The biggest mistake investors make is not getting cash flow. Not working through the numbers. Buying a negatively geared property is fine so long as you know the cash flow before you buy, not after.

Read Understand cash flow before you buy an investment property to find out more.

2. Beware the hidden agenda

There are many property investing strategies. Despite the confidence and bluster of various ‘gurus’, no way is 100% right or wrong. So beware property spruikers who say their way is the only way to invest. Also beware homespun ‘wisdom’ that’s part myth, part fact, and part wishful thinking.

You may have heard these investing ‘truths’:

• only buy within seven kilometres of a capital CBD
• only buy house and land
• never buy house and land
• only buy apartments
• never buy apartments
• Only buy negatively geared properties
• only buy positive cash flow properties
• only buy properties you can renovate
• buy low value properties in country locations
• buy art deco properties in upmarket locations.

Some commentators repeat these maxims because they believe them, but others because they want to sell these very properties. Look out for them.

3. Don't second guess the market

Let the market be your guide. Speak to at least three local property managers about which type of property is in demand locally. Make sure your potential property suits the local market.

Don’t take advice from anyone who works with the selling agent. They’re working for the vendor (and that’s fair enough). Once more, beware the hidden agenda.

4. Choose a specialist property manager

Here are my top three tips on choosing a property manager that’s right for you.

• Look at their current advertised listings. How good are the descriptions? Are they nicely written? (Personalised to the property, upbeat but not awash with hyperbole.) How many photos have they posted? Is it a feature listing that’s easily found? Would you be satisfied if this was your property?
• Ask them to send you info on their services—and then judge them on how quickly they respond, and how professional that material is.
• How many properties do they manage? With support staff they can effectively manage more than 150 properties each. But if they’re on their own, then look for an agent who manages around 100. Not more.

5. Do more research!

My top five things you should research for every investment property.

• Jobs. What’s the employment situation like in the area?
• Schools. Check out your local schools, opens in new window.
• Shops. Is all you need nearby? Shops of character and charm (not too many $2 shops).
• Transport. Decent public transport (ideally). And proximity to motorways.
• Recreation. Lots of parks. And walks of serenity.