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How to Evaluate a Potential Property Investment

How to Evaluate a Potential Property Investment

Keeping an eye on the median house prices of a city is a pretty common metric that prospective investors use to guide their property investment. As much as this can be a decent macro-level indicator of the market, it’s worth remembering to look at some of the finer details within different suburbs. Here are a few to check out when lining up a potential investment property.

How long are houses on the market?

On average, homes in Australia sell within about 30-120 days. If you’ve got your eye on a suburb that seems to have the majority of house selling in less than 40 days, I may well be worth a look. Conversely, suburbs that appear to take a longer average time to sell could be a sign to steer clear.

Rental yields

Rental yield is the median rental income over a year as a proportion of the median property value. Even in stagnant property markets, rental yields can still remain high, especially if rentals are in high demand. Ideally, you want to look for areas with a steady rental yield in order to predict with a little more certainty the potential return on any investment you make.

Price growth

A good timeframe to look for in price changes is around five years. If the average price of homes has climbed steadily over that time, it could be the perfect time to invest. Much like rental yields, however, volatile prices can be a sign to keep away until it settles and becomes a little more consistent.

Scarcity

As new developments continue to increase in numbers, established homes become increasingly scarce, growing their intrinsic value. Prominent examples are seen in character homes where heritage aesthetics, building characteristics, protective planning regulations and the inability to authentically recreate the asset limits their supply. It’s also worth noting that the majority of new developments lack this key element of scarcity, and often locked within zones susceptible to density changes. As a result, the value of ‘off the plan’ developments may be stunted by their lack of separation and elastic supply.

Value-Add Potential

In the medium to long term, investors can look to add value to their investments by renovating kitchens and bathrooms; extending the home or redesigning the floorplan, as examples. This is generally more achievable and lucrative with established, older homes, as newly built homes tend to be as modern as you could make them and therefore difficult to add value.

Consulting with the best

Perhaps the best information you can use in looking out for a solid investment is that of property specialists. At McKinley Plowman, we’ve partnered with Performance Property Advisory (PPA) to combine their research and acquisition experience with our finance expertise; providing a seamless, well-informed and tailored investment experience for all. To book a free consultation with our finance team and PPA, call us today on 9301 2200 or visit https://www.mckinleyplowman.com.au/contact-us/ today.

Paul Moran

written by:

Paul has over 25 years of experience in finding financial solutions for homebuyers, investors and business owners.
A licensed broker and member of the Mortgage & Finance Association of Australia (MFAA), Paul’s extensive experience includes 20 years with a major bank, seven of which were as commercial banking manager.
Paul delivers a holistic financial solutions to achieve the best possible outcome for a client’s personal or commercial lending needs. Paul also provides a comprehensive financial consultancy to business owners on commercial, equipment and invoice finance.

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