If you are making the choice to purchase your first investment property, there two things which you need to consider before making the purchase.
The first is the location equation, the kind of investment property you should be buying will depend on the immediate amenities of the immediate area surrounding properties.
The second is parking or access to parking, this is just as valuable as having the property itself. Everyone needs access to reliable parking as it’s a necessary convenience that helps us get by. We need it, it’s that simple.
The location equation has several variables, the prime variable being the immediate facilities available.
An apartment would be a stronger performing investment where:
- A Hospital within 2 km distance;
- Train station within 2 km distance;
- Shopping centers within 3km distance.
Workers in the health profession are ideal renters because they are not likely to move for a few years and in the event of them sub-letting, will only do so to other health employees. Consider adding a sub-letting clause to the lease limiting to those working in the health profession.
Would you rather get $550 Per week in rent for 12 months and then spend 2 months trying to get the lease signed or let it go for $525 for 24 months for health employees?
A house or duplex would be a stronger performing investment where:
- You are located within 5Km of a University or School;
- You are located within 3Km of park or other recreational facilities;
- Has an existing granny flat or has space for a granny flat;
- Public transport within 2Km;
- Have many rooms;
There a two options for the house or duplex: You can manage everything yourself which may be preferable if you are renting to students, in which case you will have high maintenance and electricity costs or you can have a real estate agent manage it, in which case you will have lower maintenance and electricity costs and a lower income.
Having a three- or four-bedroom house with an attached granny flat will bring you up to 5 or 6 rooms. You should budget to have each room rented out for $160 – 180 per week. Conservative estimate should be $800 per week in rental income before maintenance and electricity expenses in an ideal situation.
The goal of your first investment property depends on your financial goals therefore you should seek this kind of advice from your accountant. That being said, you should focus on generating equity in these investment properties, whether you stash the rental payments in a savings account or shares; you should focus on buying as many investment properties as you can.
When you rental income compounds over time, you’ll hopefully have generated sufficient equity to begin diverting receipts from your investment properties into the loans, eventually paying all of them off.
Depending on how focused you are and in your income potential, you should accumulate 4 properties within 10 years. Achieving financial freedom in fifteen and retiring within 20 years.