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With the interest rates low and the property market showing signs of picking up it may be a good time to consider purchasing either another or your first investment property. One important item to keep in mind when purchasing an investment property is to get a rental appraisal from a well experienced Property Manager (not a salesperson)!
If you are looking at an investment property the sales consultant would normally provide you with a set of rental figures, whether it is for permanent, holiday or commercial property. This may be either verbally or in writing. If there is a current tenant in the property it may be a copy of the existing tenancy agreement. Sometimes the current market rent can be totally different.
If a salesperson has given you the figures they could be slightly inflated or the rent may have not been fixed to market rent at the commencement of the tenancy agreement. It could also be due to the person providing the appraisal being inexperienced either in the field or the area. Whatever the case, because these things happen it is a great idea to obtain an independent rental appraisal prior to exchange. It is a normal occurrence to arrange a pest and building inspection, why not get an independent rental appraisal at the same time (from an experience property manager).
Verbal estimates of salespeople can be misleading. This may be because salespeople vary considerably in their property management expertise and they also won’t have a general awareness of rental values at certain times.
If there is a current lease on a permanent/commercial rental or forward bookings for a holiday property you should definitely look at the current rent that is being charged. However, this may only give you a historical figure. As such, it may not truly reflect the current market value.
The next item to consider when looking at prospective investment properties is how easy will the property be to lease? What is the likelihood of actually getting quality tenants in the properties current condition and at that particular time to the year? How easily a property will lease is affected by numerous factors. Some of these include the condition, age and location of the property, amount of similar rental properties in the area and the style of tenants in the area.
The last item and one that is often not considered is to take into account tenant turnover. A home suited to a family will often have fewer turnovers than an apartment in a large block. This is due to the fact that if a family settles in a home they are more likely to stay for a number of years, rather than uproot the family and move on at the end of the fixed term. Compare a home to an apartment and the style of tenant changes to a single person or a couple. These type of tenancies are normally shorter and the tenants would more often move as either their situation may change or they find something newer or in a better position that they extend their budget to afford.
If you are looking at purchasing an investment property in the area please give me a call. I have been a Property Manager in the area for over 12 years and can certainly give you an honest, obligation free appraisal in writing. This appraisal will be based on my experience, recent rental figures and also the time of year.