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What makes a good investment property

Len Nightingale  |  January 31, 2018

What makes a good investment property?

This is a question I have been asked many times. My first response is that there is no right or wrong answer. You need to consider the reasons why you are wanting to invest in a property. Reasons might include:


• you like the house/the garden/the location
• there is potential for good capital gain
• it will give you cash flow
• you want to put you money in a tangible asset
• you may want the house for yourself or your children in the future
• you can see the potential for property improvements.
There may be other reasons too but I suggest that at least three of the reasons should be able to be justified before going further into property investment.


What do I need to know about property investment?

Property investment is complex but there are a number of points that should be considered.

Here are the top ten points that I consider the most important:


  1. Property investment is first and foremost a business governed by the rules of supply and demand. Although we have primarily seen property price rises in recent years, this is not necessarily sustainable and property prices do sometimes come down. Similarly, the rental market and rental income can fluctuate over time.
  2. When you make a property available for rent, you are taking a risk. Few tenants treat your property the way you would and there will be wear and tear. You must ensure that you have funds to pay for maintenance and repairs.
  3. All properties need maintenance. A good rule of thumb for maintenance costs (regardless of the value of the property) is at least $5000 per property per year. If you do not need to spend on maintenance in one year, you should keep the money aside. Over time you will need to spend it and you should have enough (or close to it) money for major maintenance or renovation work.
  4. A well-presented property is easier to rent, is more likely to attract good tenants and your maintenance costs will reflect this in the long run.
  5. When buying an investment property, do not buy the best property in the street.
  6. Purchase a property with your market in mind. Who would you like as tenants? And how many tenants? Multiple bedrooms imply multiple people and multiple problems. Sometimes small is better.
  7. A sunny house is likely to be reflected in the attitude of the people living there.
  8. Don’t buy or hope to rent a property that you would not live in yourself.
  9. Rental properties do not make a profit in the first years of ownership. Expect between 10-15 years before your asset begins to work for you.
  10. Finally, a competent property manager can guide you through the many rules and regulations. Talk to us before you buy. We are the professionals!


Disclaimer: These are my opinions as a property manager. You should not proceed with purchasing an investment property without receiving financial advice about aspects such as the tax implications of capital vs. maintenance expenditure.