How to Guarantee Your Investment Property will Increase in Value
Most properties will increase in value, given enough time and patience. But there are also steps you can take to help give your capital growth a little nudge.
You have more control over your investment’s value than you might think.
Here’s a few quick tips for maximizing the return on your property investment:
When Buying, Choose a Suburb that is Almost Ready to Rise in Price
It’s a well-known fact you should always buy property in a good location. And a good investor knows they should pick suburbs that will go up in value.
But you want to buy property before the price rise, not during.
You might be tempted to pick a suburb that is in the middle of a price rise. But you run the risk that the bubble and rapid growth could fizzle out at any moment. The price rise could flat line just after you buy the property. Then it might be years while the cycle experiences a contraction until the next boom! You don’t want that.
Instead, look for cheaper suburbs where the properties have not yet started their rise. That way, you get the full benefits of the increase in value.
There are two ways you can tell if a suburb is about to have a price rise. First of all, the suburb is about to have a new major feature or infrastructure installed, such as a new shopping centre, new school or university, or a new train line. You can also expect a price rise if the suburb next to it is being developed.
Really great investors (really great real estate agents too) follow Government development approvals. If the Government is starting to spend more money, improve transport corridors and options and approving more developments, that suburb is right on the verge of a great expansion.
Second, discuss your investment wants and needs with your local real estate agent and form a partnership. Real Estate agents are at the coalface, so to speak, every day experiencing the market. A professional will always be slightly ahead of the curve when it comes to property prices, and as mentioned above, a good agent should have an intricate knowledge of the suburb now, but also the developing features emerging in the next 2-5 years. They won’t exactly have a crystal ball that predicts the future, but it’s the next best thing.
Having a great real estate partner saves you the hassle on researching and deep-diving into each and every suburb and can just make translating all the nitty-gritty that much easier.
Choose a Suburb that Appeals to Multiple Demographics
You want your property to appeal to a wide range of buyers when it comes time for resale. So consider who your property is best suited for.
Can city workers commute into central Brisbane easily? Is there a school nearby for families? Or a business and manufacturing district? Is there a good balance of affordability and lifestyle?
The wider your appeal, the more tenants you'll have to choose from each time the property is advertised to let. And most importantly, a wider appeal translates to a better likelihood you’ll get great buyer turnout when you’re ready to sell. And that always means strong, competitive offers that push your value up at the crucial moment.
Stay on Top of Maintenance
A simple way to keep your property’s value is to keep your property in peak condition. Some landlords neglect their maintenance. But it only hurts themselves in the long run.
If you ever have to sell in an emergency, the last thing you want to consider is deciding between spending precious time and money on repairs or deciding to discount your sale value.
The good news is if you have a property manager, you won’t even have to think about this. It’ll just be done for you. A property manager will carry out thorough checks of the property on a regular basis. They’ll keep you informed of anything that needs taking care of. It’s important to budget 10-20% of your rental return towards proactive maintenance.
Maintenance is also essential for keeping your current tenants happy. If you treat your property well, it will make them more inclined to treat it well too. But if the property has not been cared for, it can leave tenants feeling despondent and neglected and ultimately neglecting the property care themselves.
You can read further information on basic property maintenance here. [Include link to maintenance blog post]
Consider if Renovation is Actually Necessary
Many investors believe that renovation is the key to increasing value. But that is not necessarily true.
Renovation is a bit trickier for landlords. You often need to keep the property untenanted to undertake major projects. This might mean giving an eviction notice, or reimbursing rent for the time it takes to complete construction. If you add this to the cost of the project, your profit margin is smaller than you may expect.
For example, adding a second bathroom to a house will add an average of $15k - $20k to the property value. But it will cost an average of $18k - $25k to complete the job. And if you miss out on rent for a few weeks during this time, there won’t be much profit left in it for you.
So don’t be too trigger happy to start renovating. It’s important to crunch the numbers before you begin to see if it will actually add value to you.
You’ll often find minor renovation projects are much safer for increasing your property value, such as landscaping, new carpets and paint, and modern appliances. Keep it simple.
Don’t Be Too Quick to Resell
In many ways, the final step in the process of property investment is the most crucial. You should always try to avoid reselling when you’re desperate, or don’t have a lot of time.
You’ve invested a lot of time and money into your property. You’ve watched it grow in value. Don’t undermine all that hard work by selling too quickly. Wait for the right price.
It’s always best to speak to a real estate agent and get advice on when to sell. Make sure your suburb isn’t about to spike in price. Ideally, you should sell based on the trends within the property market, and not based on the demands of your own financial situation.
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We hope this has given you some helpful tips on how to maximize your investment. If you have further questions, our team is here to help.