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What to know when purchasing an investment property

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Tim Reardon of the Housing Industry Association and Tony Collidge of the Real Estate Institute of Tasmania discuss what people should know when considering purchasing an investment property.

Purchasing an investment property can be slightly daunting, especially if it is your first one.

WILLIAMS MEDIA spoke to two industry experts about everything to know when considering buying an investment property.

Tim Reardon, principal economist at the Housing Industry Association said it doesn’t matter what type of property you purchase and where in Australia, as there has been such strong house price growth in the whole country with all property types.

However, “going ahead there will be a slower rate of house price growth over the coming decades compared to what we have seen in past decades”.

“There will still be opportunities for greater than average rates of return by investing in property but it will require more shrewd investment decisions than what have been needed over the last couple of decades.”

Mr Reardon said the type of house you purchase should depend on the location.

“If you are looking in mining towns in Western Australia the type will be different from buying a unit across the road from a hospital in a metropolitan city.

“Be location specific and also look at the type of tenant you want to occupy the dwelling, to determine the type of housing to suit.”

Mr Reardon told WILLIAMS MEDIA there is still very strong population growth in Melbourne at 2.3 per cent and Sydney at 1.6 per cent, at least double what the average is in the Organisation for Economic Co-operation and Development member countries.

“While we are still seeing house price declines it will be relatively short lived with such strong population growth.

“Those house price declines will turn around fairly quickly, and we will see more sustainable house price growth in the future.

“People should be looking at population growth as an indicator of house prices.

“A good indicator of strong population growth is areas that have economic growth and employment opportunities over the course of the coming decade,” Mr Reardon continued.

“This includes expenditure by government through schools, hospitals, new industrial developments.”

Tony Collidge, president of the Real Estate Institute of Tasmania said it is important to do your homework, and location is critical.

“A rental property in a really good location close to services, schools and bus routes is a lot better than something out of the way," Mr Collidge told WILLIAMS MEDIA.

“Also look at the condition of the property and make sure that everything is OK."

Mr Collidge said sometimes it's beneficial to have a lower yield in a better area than a higher yield in a more risky area.

“I would suspect quite often in areas where you get higher yield there is more risk and turnover, and also potential for more expenses like maintenance and running costs.

“In Hobart for example you can get returns above eight per cent in some of the lower socio economic areas but often the properties are always being damaged, there is constant turnover, and the level of maintenance and administration required to keep on top of everything is a lot harder than having a property in a better residential area.”

Source: https://www.therealestateconversation.com.au/2018/09/04/what-know-when-purchasing-investment-property/1536028809

This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.

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