What do you look for in an investment property?

Hi dana_c_83,

For a investment it depends what you are personally looking for, there are quite a few school of thoughts on the best ways to invest. Personally if you have enough money and income buy something to start and learn by buying.

My number one rule – take any emotion out of purchasing a investment property it has to be purely financial and logical.Understand this is not advice it is just purely my thought and experience.

Positive geared properties and negative geared properties neither is wrong or better but is subject to your personal financial situation.

Positive geared have worked in the past for people with lower income, it does not have higher equity increase, usually has higher rental yield and allows additional income to purchase more. In this situation you are looking to build up a portfolio of additional income to purchase more properties.

Negative geared is good for stronger incomes who are looking for equity increases and tax deductions from their income.

In responses to your questions
– if the suburb is expensive and you can afford it, there will be less rental vacancies and usually in very populated areas. closer to metro/city areas.
– I personally like up and coming areas which have been ignored
– depending on your situation if you can beat the rush it is always a great investment opportunity, especially if there is future infrastructure or new rail lines etc.
– Close to train stations is always number 1 on my list as a investment, and convenience to commercial or business areas.
– if it is your first investment areas that you know and feel comfortable with is always important. But if you cannot afford it going further out is never a bad idea.
– Areas with strong ethnical areas help as well as they create their own hub/village.
– ideally 2 bedroom wins over 1 but if it is 1 bedroom in the middle or close to the city will outdo a 2 bedroom further out.

We can go on forever which is better, best answer is purchase within your means, purchase in a area which has potential. Avoid any places that is dependant on one industrial income e.g. mining towns.

Hope this helps.

It’s seriously situation dependent, however, to give you a feel for my situation. I’m in my 30s, married with kids with a fairly high income. I’m in the accumulation phase and still have some serviceability from my own income. I’m looking for buy and holds that are generally neutral geared with the expectation of above average growth over the next 5+ years. In reality that means it costs nothing to hold them from the start (assuming rented etc) but my net worth on paper goes up and I don’t pay tax unless I sell – redraw though is tax free :)

I look for the ugly duckling free standing home, either in a good suburb or next to one. My goal is to gain about $4m in property with less than 50% LVR and live by redrawing capital growth every year and pay the interest from the rent (some deductible / some not). Tax is reduced significantly. I have super as well.

Hi Jon

Realistically I’m a couple of decades off retiring so I’m always playing with some legislative risk. My bank currently takes 80% rental income into account, so as long as my LVR remains low (below 50%) the rental income easily covers the interest on the loan. Obviously you need rental increases each year as well.

On top of that it’s only part of my plan. I still have super (accumulative) and a pension based super as well. All going well the combo of those should be enough… hopefully!