Property Managers Melb | How Do You Find A Good Investment Property?
Property ownership can be stress-free if you make the right decisions when you purchase and lease out a property. The key is making the right moves from the beginning.
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How Do You Find A Good Investment Property?

How do you find a good investment propertyThe dream rental property is low maintenance, in demand by buyers and tenants, has high rental yields and excellent capital growth. The property runs itself and you pay other people to look after it for you. Sounds fantastic but does this property exist?

A property with the above specs is hard to come by in 2020. In most cases, ir requires a team of professionals to find and run smoothly.

 

Knowledge is vital to your success in generating wealth, in this article we share some of the tools in spotting some of the best properties in a suburb.

 

 

Working out rental yield?

 

High Rental yield: this is a measure of how much cash an income generating asset produces each year as a percentage of that asset’s value. Some properties offer low rental yield but good capital growth and vice versa.

 

To work out net rental yield you need to calculate annual rental income including expenses.

Do this by taking weekly rental income and multiply by 52 then subtracting annual expenses. Then divide annual rental income by the property’s total cost, then multiply by 100.

Use this simple calculation:

Net rental yield = (Annual rental income – Annual expenses) / (Total property costs) x 100

Investors use rental yield to compare properties. A high rental yield results in better cash flow, which helps to improve the return on investment. When buying a property, real estate agents, property managers and buyer’s agents can help you with accurate rental yields.

 

Victoria Rental Yields Info Graph

 

 

How to find capital growth property:

 

An increase in capital growth is created by the strength of buying demand when you decide to cash in and sell. The idea is to have so much buying demand that the value of the property increases in value more than the average property in the area. The factors that affect capital growth:

 

  • Location: good proximity to amenities is something all buyers and tenants look out for. Look for properties that have it all. Access to:
  • Train or tram station,
  • Close to highways,
  • In demand school zones.
  • Walking distance to shopping centres, parks and walking tracks.
  • Natural amenities.
  • Age & condition: A lot of older property can tick the location box but have high maintenance costs. Expensive repairs can add up so it is wise to factor in a maintenance fund to the purchase price which will last over the life of the property. Some maintenance can be planned, most will be a surprise so having available funds to deal with upcoming problems makes owning investments less stressful.
  • Improvements: You can easily create open plan living, add value by adding a granny flat, unit, extending a carport or garage, light renovations.
  • Neighbourhood: Are the streets and homes well kept? Do people want to live in the area? Look for a suburb with low rental vacancy rates.

 

Quick tip: The rental vacancy rate is an economic indicator which measures the percentage of rental homes that are vacant.

 

 

Attracting Tenants: Tenants that pay rent on time and look after the property like you would, are out there and looking for good homes. Buying the right property is a big part of finding this kind of tenant.

 

The other is maintaining a healthy relationship once you have them. For more information on this topic read our article on 5 TIPS TO BEING A GOOD LANDLORD.

Victoria’s highest rental yields:

Victoria’s highest rental yields

Data sourced from REIV.

SuburbDwelling TypeRegionGross Rental YieldWeekly Median Rent (Jun 2019)Median Price (Jun 2019)
MELBOURNE1-bedroom unitMetro6.7%$450$347,500
MOE3-bedroom HouseRegional6.6%$255$200,000
STAWELL3-bedroom HouseRegional6.4%$240$193,750
SOUTHBANK1-bedroom unitMetro6.2%$445$373,000
MELBOURNE3-bedroom unitMetro6.2%$950$801,000
SHEPPARTON3-bedroom HouseRegional6.2%$300$251,000
WODONGA3-bedroom HouseRegional6.0%$325$283,500
MILDURA3-bedroom HouseRegional5.7%$320$289,999
MORWELL3-bedroom HouseRegional5.7%$200$181,000
CHURCHILL3-bedroom HouseRegional5.6%$200$185,000
SALE3-bedroom HouseRegional5.6%$290$270,000
TRARALGON3-bedroom HouseRegional5.6%$300$280,000
SOUTH YARRA1-bedroom unitMetro5.5%$400$377,500
WARRNAMBOOL3-bedroom HouseRegional5.5%$350$329,500
DOCKLANDS2-bedroom unitMetro5.4%$650$630,000
MELBOURNE2-bedroom unitMetro5.4%$600$575,000
WANGARATTA3-bedroom HouseRegional5.4%$310$299,000
PRAHRAN1-bedroom unitMetro5.3%$390$385,000
RICHMOND1-bedroom unitMetro5.3%$400$393,500
SOUTHBANK2-bedroom unitMetro5.2%$580$575,000

Q: So who are the main people you need around you to buy a good rental property?

 

If you have never purchased a property before it’s a good idea to speak to people who are ‘in the know’ to avoid the typical mistakes of buying.

 

Mistakes almost always cost you money either in rental yield, holding costs or a low selling price.

Then there is the emotional roller coaster of real estate that hits you every time a mistake surfaces. They can turn into a long, drawn out process that can drain your funds and impact your quality of living.

 

Property ownership can be stress-free if you make the right decisions when you purchase and lease out a property. The key is making the right moves from the beginning.

 

When buying a property, getting advice from the right people – professionals that are experts in their area – can put you years ahead of where you would naturally end up. They can save you tens of thousands of dollars and literally keep you in the game. They can be the difference between buying a second or third property vs. not buying at all.

Mortgage brokers:
  1. Mortgage brokers: This is usually the best place to start your property investment journey. Their job is to:
    • Assess your ability to borrow funds and get a home loan pre-approval from a financial institution
    • Execute a mortgage once a home has been purchased.


Traditionally, homebuyers would go directly to the bank for a loan. The problem with this is some banks can be very tight on the amount of funds they can offer which can completely change the type of property you’re going to purchase.

Mortgage brokers have access to hundreds of loan products across many banks around Australia. It’s their job to choose the most competitive product that will suit your lifestyle changes.

The best part of a mortgage broker is that their fee is paid by the bank.

Buyers Agent

Buyers Agent: these are skilled property buyers that have decades of experience when it comes to buying property.

They used to be real estate agents that represented the property seller. Hence they know the ins and outs of the whole selling process. Now their job is to solely represent the property buyer.

They have a methodological approach to buying good quality rental investment. Their job is to source and negotiate property that has:

  • The best capital growth prospects in a good suburb.
  • The ability to attract tenants easily that will look after your investment.
  • Source a low maintenance property that ticks all the ‘good investment’ boxes.

How much do buyers agents cost? Buyers agents fees can vary so to get the best bang for your buck, find a buyers agent that offers a fixed fee until a property is purchased. Be prepared to pay anywhere from $6,000 to $12,000 for a buyers agent.

Property Managers

Property Managers: It’s handy to be in contact with a property manager during the buying process. They can give you an accurate rental appraisal prior to purchasing. The appraisal will help you with your loan approval and to avoid mistakes in miscalculating rental yield. A wise property manager will offer great advice on getting a property ‘lease ready’. Advice on preventative maintenance and presenting a property that attracts good tenants. Most importantly, they will:

  • Advertise your property for lease.
  • Qualify tenant’s suitability for your property.
  • Prepare lease agreements and condition reports.
  • Collect rent and prepare rental statements.
  • Project manage any urgent and non-urgent repairs.
  • Regularly inspect your investment property and provide feedback to the landlord.
  • Collect bonds from tenants and lodge with the state authority.
  • Conduct end-of-lease inspections.
  • Prepare a long-term maintenance plan.

Pro-active property mangers will be one of your best investments in protecting your rental for the long term. When re-selling your property, the way it has been looked after can make all the difference when it comes generating a great sale price at the end of it all.

10 Mistakes When Buying An Investment Property:

  1. Property that requires regular maintenance – Usually older homes fall into this category.
  2. Property that doesn’t attract tenants – this can force you to make risky decisions with below average tenants.
  3. Buying cheap property that has spent too much time on the market. You will most likely have the same difficulty selling.
  4. Property that has larger than normal outgoings like body corporate rates.
  5. Property located on busy main roads.
  6. Property that is isolated from public amenities.
  7. Suburbs that have sluggish capital growth.
  8. Property that isn’t typical for the suburb.
  9. Committing to renovations that are too large.
  10. Loan serviceability. Too large of a gap between loan repayments and rent.

10 MISTAKES WHEN BUYING AN INVESTMENT PROPERTY

Conclusion

 

Many people do things just for the sake of doing things and their results are usually mediocre. Getting help when buying property can give you the edge you need for financial security.

 

If you’re interested in finding out more about how a boutique property manger can help, Property Managers Melb offers a complementary first consultation.

 

In the meeting your consultant will give you a rental appraisal, assess your current scenario and provide a complementary action plan.

 

For more information on the service please call us directly on 1300 00 MELB or leave your details on our contact page

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