The BIG property investment appetite

The BIG property investment appetite

When it comes to investing in property, we can rightfully say that there are many races being run and all in the same neighborhood. Many investors however, fail to take significant notice of one major key ingredient: the fuel that drives any investment vehicle – property management and tenants.

Different strategies:

There is the new and off-the-plan investment strategy: mainly used for depreciation benefits and long term capital growth, or short term upside in capital whilst the project is under construction.Buying established dwellings – for long term capital growth and a good rental yield. The buy-renovate-sell: a strategy that captures the hearts and intrigues many investors. Popularized to the point where television shows have adopted this method.

We can go on and list many more, but I believe you get the picture. As they are individual investment strategies, they can also run alongside each other and in the same neighborhood.

Bank Valuations:

There are many ways to determine property values and for the purpose of this article I will focus on Bank Valuations. The bank valuers adopt an interesting model when it comes to valuing a property. In its basic form they look at and gather information from the three sources shown below:

1)     Comparable sales: These are the comparable sales which are both published and are collected from local real estate agents and property websites.

2)     Demand: Market sentiment, again information gathered from websites and real estate agents which helps them determine market sentiment and conditions.

3)     Rental Yields: The weekly rent obtained for the product on the day, by the local property management teams.

Again I stress the details above regarding valuations is a basic representation. Nonetheless, in its simplest form rental figures play a part in an assessment of value.

Where are we now?

In time gone past, we would use the “one dollar-for-thousand dollars” rule of thumb when determining property values and how good they were. If the rent was say: $250 per week, the property was deemed to be worth $250,000.  If we were to adopt the old rule of thumb, not one person would invest in property when we consider rental returns on values. More the reason that the rental numbers don’t stack up when compared to values in Sydney; property management and upkeep of the investment property is paramount. 

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Tenants and Maintenance:

A large number of people have invested in older property, as many others have in new and off-the-plan. What unites and solidifies any investment strategy is the tenancy and ongoing maintenance.  There are over 800,000 rental properties in NSW alone. Of these rental properties, approximately 40 percent have been built prior to 1986. Whether the property is old or new, a dedicated and professional property management team is paramount for both ongoing valuations and upkeep. Bad tenants, maintenance and other issues can have a significant effect on the value of a property.

Good management of older homes and apartments  investors is paramount with potential t issues including:

-        Asbestos sheeting: construction pre 1986.

-        Old galvanized pipes: old plumbing in and around older dwellings can be major concern.

-        Electrical wiring and switchboards:  it is surprising to see how many units and older homes are overloaded when it comes to electrics, yet the switchboards are not upgraded.

-        Smoke detectors: most people aren’t aware that there are two types. One detects heat and the other smoke, these are the battery operated detectors. How are you or most property managers to know the difference?

In conclusion, no matter what strategy you subscribe to with regard to investing in property, the professional management of your most valuable investment is paramount in order to maximize your investment. Not forgetting that bad management can also cost you dearly.  

 

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