5 key factors in property investment success
Property remains a bedrock in healthy investment strategies, as the market landscape and the needs of buyers continues to evolve. Investing in new homes and land versus existing properties offers a unique range of benefits, providing you choose wisely, plan thoroughly and stay mindful of risks.
While there is no bulletproof investment formula (and anyone selling you one should be taken with a grain of salt), there are key factors informing investment decisions that – when considered and accommodated – generally improve your chances of making choices that deliver benefits over time.
These five factors— timing, location, quality, risk, price and deal— are important to understand and plan for. Let’s look at them in relation to new homes and land.
If you’re buying an older, established property, you’ll generally only be looking to the overall market for cues to act. Is it a buyers’ market? Is a suburb overheated or on the rise?
When you’re investing in new homes, you also need to consider the timing of your buy-in to the project. If you secure your lot and deal in the early stages of a new development, the scope for growth is the greatest it will ever be, and your investment is virtually guaranteed future capital growth. The later you typically wait, the lower your returns are likely to be.
While it’s true there is sometimes less risk buying later in a project, the flip side of lessened risk is lesser returns. To maximise your growth, look for opportunities in the earliest possible stages of developments from partners with a track record you trust.
It’s the oldest real estate maxim in the book (location, location, location), but it’s an essential consideration when you’re investing in new properties. You want great homes in high-growth areas where demand is strong.
Ensure the development you’re considering purchasing within has access to current or planned amenities and is in healthy proximity to growth corridors in the region. Look for government infrastructure investment and interest from private enterprise in building out the locale.
For your investment to thrive, you’ll need to have stable tenancies. Australian tenants’ clamour for properties that suit their daily needs and cater to the lifestyle they want to live. New developments are often popular with young families, or residents who want to enjoy a safer, more peaceful way of life, without sacrificing modern conveniences and access to metropolitan areas if they need it.
Make sure your development is somewhere you’re confident locals will want to live, work and play.
If the time is right and the location is perfect, but the quality of the home product doesn’t make the grade, your investment may ultimately struggle.
Land is precious, but your future tenants (and buyers) will want a property atop that land they can be proud of. Ensure the construction experts, designers and property managers shaping your investment are qualified, experienced and can deliver the goods.
Aim for properties where floor-plans, locations and specifications are investor-optimised, and where there are inclusions available to drive value throughout the entire investment life-cycle by maximising rental income, minimise your maintenance costs and maximising future capital value.
Price and deal
New homes and land are often a chance to enter a coveted market at a competitive price point.
Identify price offerings that are competitive with the median house price for the region and no hidden strings or extras. Validate these against market measures. You want your property to be turn-key for your tenants on the day of settlement, not need extra work or expense from you before you can start earning.
Look for deals that allow you to act on the right timing, for example, a small deposit and a cool off period that allows you to verify your financial capacity and complete your due diligence without pressure. This lets you make the right moves while you put your plans in place.
No investment is without risk. But working with the right partner and teams should alleviate unreasonable risk and create opportunities for you.
Seek out developers and agents that are prepared to work with you to reduce risk to you and your investment, and examples of investors who have had success working with those experts.
You should always feel comfortable asking your developer or agent questions to better understand the risk profile of the property in question, such as, what is the maximum time a build could take, and do you have guarantee for defects?