5 essential attributes of a good investment property

There may be no money-back guarantees in property investment, but by keeping the following essentials in mind, you can get pretty close to ensuring good returns. 

1. Capital growth potential

The greatest financial gains will always come from a property's equity growth potential.

Unfortunately, there is never a permanent guarantee that a property will appreciate, but knowing where and what to buy certainly helps.

There are some features that almost always facilitate capital growth, such as proximity to services, unique building location, parking, convenient layout, desirable view, good condition, and price compared to others in the area.

2. Rental return 

You want to find properties whose rental income meets the cost of holding. Units or apartments in desired neighbourhoods are often good options, as they will usually yield more profit than the purchase price ratio compared to the houses.

However, the potential rental yield of the property will do nothing to reduce the risks associated with the investment if its vacant rates are high, nor does a high rental yield indicate high capital growth potential.

Limit your search to places where there are traditionally low vacancy rates, which should yield consistent profits.

3. Keep within your means 

For seasoned investors or new to the market, buying beyond their means is a big no-no. They only tend to over-commit themselves, which is a quick way for the investment to fail.

You also need to consider the budget of the future buyers as it reduces the attractiveness of the market. For example, top-end properties have a more limited market share than properties in the middle of the market, as do the cheapest end of the market.

4. Location & Infrastructure

Ensure that the place has the necessary features (increasing buyer interest, population size, multiple industries, etc.) to provide both a safe investment environment and a good opportunity for capital growth.

Population records, especially growth, can be used to guide where to invest. For example, it may be useful to avoid suburbs with zero or negative population growth, such as relying on an industry.

You should consider where the property is located in relation to major amenities such as schools and public transport. The more convenient the property, the easier it is to occupy.

Good, quality infrastructure is critical to the health of the property market. Look for infrastructure and new projects that will expand the area in the future, not temporarily during the construction phase.

5. Demographics

Just because one type of asset is more interested in one location does not mean that it will perform similarly in another.

If your investment ever realizes its full potential, it needs to cater to the local population, whether the residents are working professionals, families or students.

This means that the property must have features families look for in a family-based suburb, and minimal gardens and courtyards for students as an example.

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This article does not constitute advice; readers should seek independent and personalised counsel from a trusted adviser that specialises in property, a tax accountant and property design specialist.