When interest rates are high, investing in a small property such as an apartment or unit can be a great way to maintain your borrowing power. If you’re thinking of investing in a small-space property, there are a few things you should keep in mind to make sure you choose the right one. With careful planning, you can get the investment returns you’re looking for.
Benefits of buying an apartment or small property
Nowadays, an increasing number of people are opting to purchase smaller properties such as units and apartments. There are several reasons for this shift: for one, you can usually buy these types of properties with a smaller deposit than you would need for a house. In addition, the ongoing costs such as rates and maintenance tend to be lower for units and apartments.
Another advantage is that if you have an apartment or unit, the body corporate usually covers many of the maintenance costs associated with the property – whereas if you own a house, you are responsible for all maintenance issues. From a financial perspective, then, investing in a unit or apartment can be a very attractive option – especially for first-time investors.
Research is key to the success of your investment
Are you looking for an investment property that will give you both capital gains and rental returns? If so, careful research is key. Here are some things to keep in mind:
Talk to local real estate agents and property managers. They will have insights about the following topics:
- The local economy (e.g., employment growth)
- Supply and demand of small-space property in the area
- Future developments that could affect the market
- Historical growth of property prices in the area
- Current rental yields on properties similar to the one you are considering
- The median price of properties in the area
Tips for analysing market data
It’s crucial to analyze the data you collect to find a location with maximum profit potential. Here are some key indicators:
- Days on the market. How quickly do properties sell in the area?
- Vacancy rate/demand to supply ratio. Is there much competition amongst renters?
- Rental yield. What percentage of the price of the property can you collect in rent?
- Auction clearance rates. Do sellers need to reduce the price to get a sale?
- Limited available property. This could suggest that demand exceeds supply and this is likely to drive future capital growth.
As your mortgage broker, we can help you crunch the numbers to see if they add up. We’ll help you choose the appropriate loan that will not only serve your needs now but could set you up for future investments.