12 September, 2022 / Category: Blog
With inflationary pressures starting to come under control and a lack of supply of rental stock in the Melbourne market, the pendulum is beginning to swing in favour of the rental provider. Melbourne could soon see a tighter rental market than Sydney, with the gap between the two cities continuing to narrow. Increasing rental returns and slow wage growth have increased interest in property investment as a wealth creation strategy.
So, what is the best process to follow when investing in property?
The first, and arguably the most crucial step in your property investment journey, will be selecting the property you want to buy. At Infolio, we have four guiding principles we follow to find the right investment property for our clients.
Property investment is a long-term game, so we always look for areas with proven capital growth and potential for more growth in the future. A good starting point is the ten-year growth cycle for a particular area. If an area is brand new, without historical growth records, we tend to avoid it, as while the potential upside might be good, the downside is unknown.
Other than historical growth, we consider factors such as forecast population growth, the general economy, and local infrastructure. This is why areas surrounding the CBD, such as Melbourne’s inner west or inner south, are in high demand as investment locations. Recently, we have secured investments in the deep Bayside suburbs of Mordialloc and Beaumaris inner parts of Mornington Peninsula, such as Mornington or Langwarrin, where access to the beach and infrastructure means rental demand is high.
When sourcing investment properties, you must know the area you are buying in well. Renters prioritise places that will make their life easier, so well-located properties within a good suburb tend to be the ones to rent first and for the best price. At Infolio, we only buy in areas we know well, so we are confident about where the best streets with good access to transport and amenities are.
Before buying an investment property, ensure you understand the rental demand in the area, what renters are looking for in that area (i.e. apartments versus houses) and what they are willing to pay for it. Infolio’s Investment Specialist, Will Crowder, says, “before we buy any investment property, we always discuss the rental demand and price point with our property management team. This ensures we can provide sound advice to our clients on the value of a property.”
Understanding the type of property renters want can influence your purchase decision. For example, if you are buying in an area dominated by families, it’s best to look for a property with a bit of land, i.e. a townhouse or family home rather than an apartment.
Finally, Crowder says it’s imperative to know your numbers “financials are crucial when it comes to property investment, so we always make sure our clients buy at a price that aligns with the anticipated rental return.”
Lastly, make sure the property is well built. We are often referred to clients who purchased an investment property (usually an apartment) only to find out that substantial works are needed on the block that they weren’t aware of at the time of purchase. When investing in an apartment, you must understand the Body Corporate requirements and financial forecast. Infolio will always thoroughly review a property before recommending it.
Finding something with room for minor improvements is good for increasing your capital gain on your investment over time. Infolio’s Investment Specialist Tristan Utting says, “our preference for improvements are simple upgrades such as bathrooms, kitchens or landscaping so you can minimise renter downtime when you choose to improve.”
Once you have found the perfect property to buy, the next piece of the puzzle is to have a great property manager to maximise your rental return. Nicole Hiddlestone, Infolio’s Head of Property Management, says, “the secret to maximising rental returns is keeping your renters happy. This will ensure they stay longer and are happier to pay a higher price.”
A good property manager will look after both the rental prover and the renter to ensure the renter wants to stay at the property at the right price. Infolio does this by providing:
At Infolio, we follow the premise that happy renters equal better returns.
We pride ourselves on a 1% vacancy rate across our portfolio (compared to a Melbourne average of 1.3%*). We also have an average on-market time of 14.9 days (compared to the market average of 22 days for July 2022).*
We achieve this by setting the rent right from the beginning. Our in-depth knowledge of the market allows us to set your rental rate to ensure you maximise your return and minimise downtime. Combined with a comprehensive advertising campaign, and our extensive network of renters, Infolio is ideally placed to achieve the best results for your investment property.
renters love hearing that you’ve made some recent renovations to your rental. And you don’t need to spend an arm and a leg to get a good response.
Infolio Projects can assist with making these upgrades happen in a timeline manner. They will work closely with our property management team to ensure downtime is minimised and works are focused on the areas most likely to lift your rental returns.
Your intuition might tell you to get as much rent as possible. At Infolio, we focus on setting the right rent according to your area. You must balance strong returns with finding a suitable renter promptly.