In the ten months to October 2021 the cost of buying a typical Melbourne house increased by almost $600 a day… Meanwhile the cost of buying a typical Melbourne apartment increased by $150 a day.*
This is good news for property owners, but those wanting to invest in the market have been left wondering if they have missed the boat… And can you blame them? $600 a day growth is mind boggling… It equates to paying an extra $4,200 each week that you miss out.
Not surprisingly ‘rentvestors’ and those looking to invest in property for the first time are starting to wonder if they need to come up with a new plan.
I’m here to tell them ‘you don’t’.
There are plenty of good investment properties out there – you just need to know what to look for
First time investors tend to focus on price and want to spend as little as possible on their first property investment. In my experience this strategy doesn’t pay off in the long run… The focus on keeping the budget low means that first time investors often end up making one of two mistakes:
- Buying an apartment (because they’re a cheaper option)
- Buying a cheaper property, away from shops, transport and the things that renters want.
When they make this mistake, it tends to have two big repercussions:
- The rental return is often significantly lower than the loan costs – making the hold cost of the property expensive.
- The growth in the value of the property is lower and in turn the overall return on investment.
If you are a first time (or a second or third time) investor you should focus on buying a property:
- In a location that is desirable for renters but is yet to ‘boom’ – near water or shops, cafes and public transport.
- That provides a comparatively higher rental return, to that of similar priced properties in other areas.
- That has a relatively low hold cost – the rental return covers most (or all) of the cost of holding the property (loan repayments, outgoings and property management).
To do this you need to:
- Do your research and crunch the numbers.
Often you will find that investing in a more expensive property in the right area will provide a higher rental return and result in a lower hold cost, than a less expensive property. You need to know the value and rental returns of different properties in different areas across Melbourne to find the opportunities and make sure you don’t pay too much.
- Put in the time.
The massive growth we’re seeing in the Melbourne market is largely a result of demand – lots of buyers and not enough properties to round. When you’re in the market you can’t afford to take your foot off the accelerator. All too often investors miss really good opportunities because they decide to take a break from searching or don’t jump on an opportunity fast enough.
- Build relationships with agents
If local agents know you and know what you’re looking for they will keep an eye out for you. Take the time to build relationships with the agents in the areas you’re looking to buy and check in with them each week or two, as often they will have new or off market opportunities that suit your needs.
If you are serious about buying an investment property you really do need to treat the search like a full time job. If you can’t, then it is wise to engage someone who can and will. Buyers advocates can be an incredible asset, especially for first time investors. If they’re good, they will save you far more than they cost you.
At IPB we’ve been buying property for investors for over 25 years. We know exactly what is a good buy, what will perform well as an investment and how to play the game. We have relationships with selling agents across Melbourne and get access to off market properties daily. We will save you both time and money.
If you’re a rentvestor, first time investor, or an experienced investor – we will help you buy sooner and smarter. So why not get in touch and explore the possibilities?