What to look for in an investment property

We are all different, this includes our tastes, financial situations and of course, the types of properties that suit us as real estate investors.

Before investing in any type of real estate you should do thorough research into what types of real estate investment would best suit you.

For many novice real estate investors deciding what type of property to invest in is the biggest hurdle.

There are 3 main types of property that investors will consider.

1. Residential
2. Commercial
3. Industrial

It is common for many first-time investors to begin with residential properties.

People are much more comfortable with residential properties as a result of experience from having purchased their own home

If you are more interested in residential real estate, are you looking to invest in landed properties or high rise apartments and units?

The capital gains potential of residential real estate varies significantly.

As a rule, freehold land will experience greater capital gains, because the benefits of owning the land outright are much more pronounced than the benefits owners who own property in group title scheme experience.

Capital appreciation in freehold house and land investments is extremely attractive to most real estate investors, but of course the location of the home is always a very serious consideration to make.

If you are seeking rental cash flow above capital gains as part of your real estate investment strategy, then residential apartments and units might be a better option this type of property usually produce very attractive rental returns.

But beware, group title properties come with body corporate costs that owners of freehold house and land do not have to contend with take this into account before deciding if this is the right investment for you.

Commercial real estate investment

If you plan to take the commercial real estate route it is imperative that your interests lie in shops, offices and other commercial real estate options. Commercial real estate has the potential to produce a good profit, but you must be clear about what you are looking for with regards to your real estate endeavors. It is important to work out what the properties are sold for in the local neighborhood and not what are their asking prices on the market when it comes to commercial real estate be careful of the purchase price.

Many seasoned investors choose commercial property investment as their preferred type of property when compared to residential.

There are a number of factors that lead to this preference, but some major deciders would be the ease of management of the investment.

When it comes to commercial property, a tenant rents the property pretty much on an is basis even if it is completely bare the tenant renovated the property with the necessary interior design to suit their business at their own cost.

Industrial real estate investment

Seasoned real estate investors often choose industrial investment properties to diversity their residential and commercial portfolios.

An industrial real estate investment is quite unique to begin with, the target tenant market is much narrower than residential and commercial properties, because very few businesses require an industrial space to operate out of.

Industrial properties also require a much more rigid type of insurance both on the buildings itself and in terms of personal liability insurance.

Investors need to take these variables into account before they decide to choose industrial properties for their investment portfolio.

Quite simply, the type of real estate investment that suits you will depend on your financial situation, investment strategy and time of life.

Location – One of the key factors of an investment property is location. The best location is one that is close to transport, education facilities, shops, medical facilities and entertainment facilities, such as restaurants and cinemas.

Potential urban development – areas where councils or developers plan to add new facilities are also good options as that will make those areas more popular in the future also.

Budget – Your maximum purchase amount and ability and willingness to repay will play a large part in narrowing down your options of what areas and what type of property you can buy.

Units vs Houses. - Many investors have been told different things in terms of what makes a better investment – unit /townhouses or houses. In general either can work - units tend to have a higher rental return but lower capital growth than houses. Houses also have greater flexibility to upgrade and develop than units but are relatively more expensive in the same area.

New vs Old
There is often debate about whether to buy an older or a new property. In general, newer properties are more expensive. But there should be less repairs, higher rent and higher depreciation allowances than older property. 

To help you find the investment property to suit your critieria for investing in property there is no better place to start than Real Estate Investar. Watch the 24/7 on demand webinar to find out more.

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