When it comes to investing in property there are two main areas to consider – how much will it cost to hold (holding costs) on to and how much will it grow (capital growth) over the time you plan to hold it?
Holding Costs – So much is going to cost you to hold the property over a period of time? You need to look at the cost of the mortgage, the amount you’re likely to receive in rental payments, cost of repairs to the property, vacancy rates, agency costs and the cost of strata, council, electricity and water.
Rental Yields – Rental yields are determined by the supply and demand of property. If there is an oversupply of rental properties, your rental income is likely to reduce. This affects affordability and holding costs for investors.
Capital Growth – What causes one area to outperform than the other? Or even one property in the same area over another? There are many factors to consider, both macro and micro.
Infrastructure Investment – how much government and private investment is directed towards a city can make an enormous difference on both growth and population movement. Roads, transport, hospitals, mining, resources and more…
Population Growth – Looking at both the national population growth rate as well as population movement from one area to another, which is often due to infrastructure investment, can hold the key to the next best area to invest. It will influence both the holding cost of the property in relation to rental demand as well as the capital growth as more and more people move into an area.
Supply and Demand – How many new properties are being built in the area? How will that influence or accommodate new population growth in an area? Simply put, if there is an undersupply of good, affordable housing, the investor is likely to see increased rental income and improved cash flow. There will also be a lowering of the vacancy rate. Undersupply can also put pressure on property prices. With an oversupply the opposite is true and we see rents decrease, vacancy rates increase and property prices decline.
There are many more factors to consider when trying to pinpoint the best properties in the best locations. At Calla Property we work closely with property research companies that, in some cases, research more than 100 macro and micro variables, that help to lessen the risk when finding the right investment property. We’re happy to share that knowledge with you and show you the properties they’ve identified that will put you well on the path to a successful property portfolio.