How to find a first home that will also be a great investment
Finding the right property is a difficult task for anybody, but an even harder feat for the first home buyer. How do you know if you are buying a good investment, or if you are committing yourself to something that you are going to regret down the line?
Here are 3 things to consider when seeking the perfect first home;
Choose the right suburb
Direct your focus to suburbs that have a good track record and desirable qualities, such as proximity to the CBD or beach. If the capital growth is above average, you are on the right track. Areas such as Victoria Park and Maylands are great areas to consider if you are looking in the sub $600,000 price range.
Less than the median house price
Once you have selected a suburb(s) of focus, search for properties that are selling around the median price within the area. Whether the property is renovated or not is irrelevant, however if there is room for renovation, the opportunity to add value down the track exists. As a rule of thumb, consider properties within 10% of the median price. Also consider the configuration of a property in relation to others in the area, for example, if most of the properties in the suburb for sale are 3 x 2 villas, be careful buying a 2 x 1 villa or a 3 x 1 villa.
Future investment potential
As a first home buyer, it is likely that you will be living in the home for less than 5 years. Keeping this in mind, it is best to consider your long term options with regards to future investment potential. Retaining the property as an investment through renting is the preferable option from a long-term perspective, unless the money from sale can be better utilized elsewhere.
Consider a property where you can add value down the track and a property that will appeal to as many people (tenants and buyers) as possible. Rather than thinking about your situation now, consider your situation in 5 years time.
Some properties are better suited as rentals than others, so keep this in mind when initially selecting a property to buy. Distance to shops and public transport is important. For instance, being close to a train station makes an investment property attractive to tenants, but some owner occupiers will be deterred from living next to a train line, potentially creating less competition when buying. Also consider that a property with elaborate gardens may draw in owner occupiers, but is going to be less attractive for tenants and create more hassle for you. In this instance, a villa with little or no garden is ideal.
Readers should always seek their own independent advice prior to making any decisions regarding property or finances.
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