Expert Advice: by Lindy Lear
Thank you to all the readers and my clients who voted me Property Investment Advisor of the Year for the second time. I feel my reward is knowing that I have helped you in some small way towards your property success.
In my role as a property advisor I help people with their decision as to which is the right property opportunity for them. Here is a summary of some of the criteria that makes a property the right property to buy for investment.
My first criteria is affordability – is the property affordable to buy? Will the bank lend the money? Have you the funds to complete the purchase? You will need your deposit, plus additional funds for stamp duty and legals. For new beginning investors this usually means having savings to get started. For intermediate investors it may mean using equity from other property to leverage into a new purchase. So for both types of investors I would recommend you start 2013 off by having a Financial Healthcheck to assess your readiness to invest. Don’t rule yourself out and try and assess yourself. Different banks have different loan assessment criteria and deposits can be as low as 5%, so you may be closer to investing than you think!
Potential for Capital Growth
My second criteria is based on potential for capital growth and how suitable the property is for your strategy. For a buy and hold strategy you are looking for good medium to long term growth potential, and for a buy and sell strategy you may want good short term growth. However everyone wants to have some good star performers in their portfolio, so buying in areas where the drivers for growth are strong is essential for all strategies.
For 2013 the macro growth drivers to look for are areas where population growth is above the national average, where employment demand is strong from infrastructure spending, where the economy of the area is diverse and robust , or has resources influences and where the supply-demand ratio for housing is out of balance due to all of the above factors. The micro growth drivers to look for are new infrastructure services such as new rail stations, new roads, new services, shops, schools, medical, recreation facilities etc, and of course the new McDonalds factor!
Better than Average Rental Yield
My next criteria is based on the rental yield and what is in demand by renters in the area. If a property is in higher demand then you can command a higher rent. If the demand is for furnished properties then buying a furniture pack is an investment to get a greater return. New properties have strong renter appeal and may also give you greater returns. The aim is to get the best rental income with a positive gearing result or to reduce your holding costs as much as possible. I am looking for yields of 5.2% on average, but yields of 6-7% in growth areas is common and based on furnished rents a yield of 9-10% is a dream result for investors. I keep my mind open as to whether the best opportunity to buy will be a house, an apartment , a villa or townhouse, depending on the affordability for the investor and the rental yields for each.
Low Vacancy Rates
My last criteria is to choose property in an area where the vacancy rates are low indicating that there are not many properties to rent. My investors want to know that they will get a tenant straight away and not have to worry about vacancy periods. I look for areas with less than 2% vacancy rate, and use my on the ground knowledge and contacts in the area as well as published vacancy rates (which can be 3 months old).
Property Market for 2013
Based on the above criteria, the areas to I am watching for 2013 include the Brisbane growth areas north and south of CBD with affordability being top on the list. The strong drivers in the Queensland regional cities of Townsville, Rockhampton, Mackay and Gladstone are keeping them high on investors hotlists for 2013 with great rental yields. Darwin, Perth and Sydney are showing soaring rental growth and would be worth watching in 2013.
Those investors who take action as soon as they have financial capacity will find the right property at the right time. If you would like help with a financial healthcheck for investing please contact me firstname.lastname@example.org. The right property for you is out there waiting.
Lindy Lear is a successful property investor who had a late start into investing, yet has grown her portfolio to eight properties in three years. She is a qualified property advisor and general manager of Rocket Property Group, and she won the Reader’s Choice Award in 2009 & 2012 for Property Investment Advisor of the Year. Lindy is passionate about helping others realise their goals through investing in property, and can be contacted at 02 8012 9669 or visit www.rocketpropertygroup.com.au
To read more Expert Advice articles by Lindy, click here
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property
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