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Signs of a Good Property Investment

Building a property portfolio has long been a popular investment option, and recognising the signs of a good property investment is the key to success. Certainly not everyone who has invested in property gains from it, especially if a thorough review was not undertaken before purchase. To help you narrow down your options, we’ve listed a few key factors that make a good property investment.

Type of Property

As you might imagine, there are certain types of property favoured by a potential tenant, and those less so. Apartments, units, and family homes tend to cater for the majority of renters in Australia, so it stands to reason that effective, cashflow-positive investment properties fall into these categories. Unless there’s demand, consider saving the beachside mansion or rural acreage for yourself, if it’s your cup of tea!

Suburb Growth Potential

Looking at historical records in the area you’re eyeing to purchase is a good place to start your research. REIWA has easily accessible data that you can use to see how a suburb has performed over previous years. Aside from prior performance, also look at what’s happening around the area in the next few years. Is it poised for development? Will there be any infrastructure improvements in the area? Is there strong growth in population? Have the surrounding areas experienced capital growth? These are just some of the indicators you should be looking at if you want to achieve capital growth.

Getting good rental returns

If you decide to invest in a rental property, ensure that the average rent in the area will cover as much of the expenses of maintaining the property as possible. The rent you will charge should hopefully cover your mortgage, tax and the cost of maintaining the property. If not, your property to be negatively geared which may be your preference from a tax perspective. However, the goal of any investment should be to turn a profit, which will outweigh any tax incentives you may receive by being negatively geared. When you consider the rental market across Australia since COVID, finding tenants has not been particularly difficult for investment property owners, and a lack of supply has pushed prices up substantially. As such, investment activity has grown and many investors find themselves in a cashflow-positive position.

Low maintenance

Some investors favour properties that are in less-than-perfect condition as they can secure it for a lower price, make improvements and increase its value. If you do go down this route, be sure to consider what impact the cost of maintaining the property will have on your cash flow. Smaller gardens with native plants, durable flooring and fixtures, and paved outdoor areas are a good start.

Access to public transport

Whether you choose to purchase a property within the city or the outer suburbs, having access to public transport is something you should consider. The greater transport options available for a prospective tenant, the greater the chances the property will maintain or increase in value and achieve solid rental returns. The popularity of established suburbs with great access to train stations and multiple bus routes is reflected in their median sale and rental prices, whereas newer suburbs further away from the city tend to have little to no public transport access close by, and price data tends to reflect this fact.

Local Amenities

Locations for high-performing investment properties often have several of the following within close proximity:

• Activity hubs
• Childcare centres
• Reputable primary and high schools
• Tertiary education like universities and TAFE
• Recreational facilities (swimming pools, parks, etc.)
• Shopping centres
• Hospitals

Rezoning Potential

Larger blocks of land are sought-after where zoning provisions afford the potential to subdivide and build two or more dwellings. If you are planning to invest and hold the property for medium or long-term, consider any potential future council zoning plans which could enable a subdivision. Current housing supply shortages have seen increased pressure on local governments to consider rezoning as a way to unlock land on which to build, by allowing greater housing density. It remains to be seen, however, whether there will be any significant movement in this space.

Over to You…

Professional advice from a property expert and financial adviser will help you determine if investing in a property is the right decision based on your current financial situation and goals. Our extensive network of professionals across the country includes property professionals, so feel free to reach out for an introduction. Once you’ve got your foot on the property investment ladder, our tax team can help you ensure you are maximising your deductions and optimising your tax position. If you’d like to find out more about how McKinley Plowman can help you make the most of your property investment journey, you can contact us on 08 9325 2411 (Perth), 08 9301 2200 (Joondalup), or via our website.

Further Reading:

https://www.moneysmart.gov.au/investing/property

DPN – Investment suburbs: How to find the best

written by:

Nigel Plowman

Prior to forming McKinley Plowman, Nigel specialised in management consulting and international accounting, enjoying success in Australia and in the United Kingdom. His extensive experience in management consulting, international accounting and innovative tax structures has been a major driver in the success of McKinley Plowman as well as the many businesses he has steered towards new levels. Nigel is dedicated to fast-tracking his client goals with cutting edge tax and business strategies. He is a member of the CPAs and the Taxation Institute of Australia and enjoys developing tax strategies that work well here and around the world.