When buying a property you need to decide what is more important - capital gains or
income returns, because it's difficult to find a property that offers both -
especially is a prime location.
Depending on your strategy, the following factors are important:
The better the location then the better the chance of capital gains. For example, a
property that is close to amenities such as schools, parks and shops stands a much better
chance of rising in value than something that is less well positioned.
If you're looking to bank on location then you're probably likely to shop for the
worst house in the best street.
The type of property that you should be looking to buy will dictate the type of tenant
that you are going to attract. For example, a studio one-bedroom Inner City apartment is
not built to cater for a family - so the proximity of schools isn't likely to be
All manner of tenants will apply to rent your property, but the real challenge is to find
the right tenant for the right property. Pre-qualifying tenants is essential to your
The construction and condition of the property is also important. Brick homes are
generally worth more than their weatherboard counterparts and period style homes attract
emotional charm that generally ups the price too.
But what's critical to know about the property is what you can't see... for
example, I've heard of seaside homes built with nails that'll rust, which is a
big disaster waiting to happen!
Being a savvy investor means making sure that you know what you're buying.
There's no point buying a property under a buy and hold strategy if you can't
afford to own it for the long-term. That's why it's important to avoid buying on
emotion and gut feeling and instead focus on the facts, which really means that you need
to complete a full analysis of the numbers.
But if you're financially challenged or crunching the numbers makes you squirm, then
it's all the more important as you're probably the sort of person that's most
at risk of making a poor financial decision.
Make sure that you avoid buying based on the best case scenario too. See what effect a
change in interest rates and a movement in rents does to your profit margin and ability
to hold on to the property if it starts making a loss.