When you invest in property, the long term goal is about increasing wealth and securing your financial future.
However, there is a misconception that property investment must aim to deliver positive returns. Whilst instant cash flow is seductive, it isn’t necessarily a sound strategy for long term property growth.
When you invest in property, the long term goal is about increasing wealth and securing your financial future. However, there is a misconception that property investment must aim to deliver positive returns. Whilst instant cash flow is seductive, it isn’t necessarily a sound strategy for long term property growth.
Whilst your investment strategy will depend on your goals and the timeframe you have to achieve them, capital growth should remain your ultimate goal in order to achieve true financial independence.
Here are our best tips to help you achieve invest for capital growth (and rental yields) before buying an investment property.
1. Look Before You Leap
2. Hunt For Desirable Location
They are definitely areas that have more growth potential over others. Choose a location with features that are always in demand. Properties with easy access to public transport and shopping precincts, close proximity to good schools, and have desirable lifestyle factors nearby, such as parks, beaches and rivers, have a greater chance of retaining and growing in value.
3. Focus On Features
There are particular features in an investment property that make it more competitive, both on the rental and sales market. Look for a generous sized bedrooms, off-street parking or garaging, good natural light and other features that set it apart from other properties in the same street. What’s more, keep in mind when you invest in a median-priced property, it means more people can afford to rent or buy it, which also means lower vacancy periods and quicker sales turnaround.
4. Invest In A Valuation
Never rely purely on a property appraisal from a real estate agent when investing in property. An appraisal is only a market indication based on comparable sales, it is not a valuation. A valuation is an assessment of the land value and improvements to the property. It also takes into account property depreciation, sales comparison and construction costs. Investing in a valuation before purchasing, will ensure you don’t overpay for a property , which will significantly decelerate it’s long term growth.
5. Buy Blue Ribbon
There is a reason that cheap properties are cheap. Typically it’s because they’re not in high demand and have no competition. Many times, it can be safer to buy at the current market price for a higher quality investment property, than to go for the cheaper option. Note that different suburbs will have their own version of what is “blue ribbon.” Blue ribbon property in one area could be family homes, whilst another, may be contemporary apartments with great views.
6. Choose A Good Broker
If you’re an investor who is aiming to build a portfolio as quickly as possible, you’ll want a good mortgage broker on your team. If you can borrow 70% of an investment property's value rather than 60%, it means paying less for your down payment. Often, it’s not always about getting the cheapest mortgage rate, but about having a broker who will do all the loan legwork for you, so you can spend more time looking for your investment opportunities.
7. Ramp Up With A Reno
Another great strategy to increase you capital growth is to renovate. Keep a lookout for properties in good areas, that need renovation. Purchase them at a competitive price, update their features, and then achieve a higher rental yield or sales price post-renovation.
8. Appoint An Experienced Property Manager
An experienced property manager is a long-term investors best ally. They help you to achieve the best rental yield for your investments, and they’ll ensure the rent rises in sync with the market. Unfortunately, there are still many self-managed property owners who avoid increasing rent returns, because they fear losing their tenants and being stuck with a vacant property. A specialist property manager works proactively with investors so that the risk of a vacant property is almost non-existent. And because of their keen knowledge of the market, they can also suggest cosmetic improvements that will help a property’s rentability and long-term capital growth.
If you would like to some expert advice on how to help increase the capital growth of your investments, then get in touch with one of our our property specialists today.