I want to buy an investment property. How do I tell if it’s good?

I have a spreadsheet somewhere, but you can get one from your accountant (and you really should have an accountant if you’re buying investment property). Instead let me list just a few factors for your consideration. This is not a comprehensive list but a starting point. Also, decide whether you’re interested in doing upfront work. I have a post on value-add renovations, if you are. 

  • target demographic – city/schools/etc, “niceness” of interior, dishwasher or no, neighbourhood reputation
  • target demographic results – turnover, trouble, risk level for big ticket items
  • how to appeal to target demographic, within reason – furnished, rent by room, marketing
  • how any value-add renos affect your target demographic
  • return on reno spend, as distinct from reno add – eg. minor dwelling/granny flat significant cash flow increase but no added value above spend

Also, the same factors apply as buying a house. leasehold, bodycorp, covenants, crosslease, insurability, etc. 

And a few extra factors, common to investment property in general: managing from afar vs PM vs other options (risk of bad PM), regulatory requirements/compliance, tenant risk, accounting and structure, hassle…refer this post for details. 

Note: calculating return on spend vs return on final value – I’ve seen people do the math either way, and to be honest it doesn’t make a huge difference as long as the property is profitable from day one. 

 

 

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