Over the years I’ve written a huge amount of investment loans, and while the nuts and bolts are the same as a home loan, there are real differences in the approach that property investors take when deciding on a property to buy.
The main differences are mindset and the need for research.
When you’re buying a home, it’s all about what suits you: where you want to live, how long you’re planning on living there, how much space you need, your budget and that list of things you can’t live without, or don’t want to live with (like a high maintenance property).
When you’re buying for investment purposes, you need to consider:
- Your financial goals and timeframe
- Your budget
- The location
- The type of property
The first two considerations require you to do your homework, some planning and talking to me about your borrowing capacity. The third and fourth require research.
When choosing the location, you want to know where there is:
- Forecast strong population growth
- Forecast strong capital growth
- Infrastructure investment
- High rental demand and low vacancy
This will help you decide on the location to pinpoint. Once you have that, you then need to determine the typical renter in the area.
If you’re buying an inner-city apartment, is it likely that your tenant will be looking for something industrial and cool with a hipster vibe, or something impressive with interesting design features, a view and great common areas?
What will your tenant be looking for in a home? Would they prefer bike storage and public transport on their doorstep or a car parking space? What other features would make a property stand out from the others in the rental market?
If you’re looking for a house and land package in a suburban area, is it more likely that your tenant will be a young family looking for space and close to schools, parks and sporting facilities? Or empty-nesters who will be looking for less space and more convenience to shops and health care facilities?
Property investing requires a shift in mindset from “what do I want” to “what do they want”?
Research is going to answer those questions for you.