Investing in property is a big financial commitment, so you do need to do your research before jumping in.

The internet has made making research a lot easier, but the key to good research, is knowing what to look for, and once you’ve got the information, knowing how to analyse real estate market data. This will help you to identify the profitable opportunities and avoid potential pitfalls.

First and foremost, know your budget, and what your motives are for investing in property – is it for capital growth or to earn an income – as this will affect the decision making process.

Once you know your budget, you can then look at researching the following areas:

1. Know the location

You want to buy a property where people want to live! If there are characteristics to an area or location, or it is in a setting, such as a rural location, which doesn’t appeal to a wide audience, the property will be harder to rent out, and it could sit empty for a period of time.

• Demographics

Look at who’s living in the area. Is it predominantly retirees, professionals, families or students? This will indicate the type of tenant you will attract, and hence you’ll need to consider this when looking at properties.

• Desirable locations

First and foremost, people want to be safe, so you need to be looking at areas with a low crime rate. Then think about what people want in desirable locations – good schools, easy access to amenities, proximity to work, and an area with good transport links. If the desirable location is above your budget, look at surrounding suburbs; tenants do want to live close to desirable areas, even if they are a couple of suburbs away.

• Areas of growth

Investigate up and coming suburbs – even the new out-of-town developments. For instance, are new roads or railway lines being built to improve access, or are there plans for a new shopping or business centre?

However, what’s being planned for an area, could affect property prices in both a positive and negative way. While people want good access to transport, they may not necessarily want to live right next to the new main road or shopping centre – that ‘bargain property’ maybe a bargain for a reason!

As well as looking at the property websites, check the local council website to see what’s planned for an area.

2. Typical property prices

Like buying a property to live in, you want to avoid paying too much for your investment property. Monitor sales for an area so you get a feel for how much property is going for – and also spot new property listings where owners want a quick sale, so could be willing to accept a lower offer.

3. What’s the rental income

As well as looking at the price of a property, you need to understand how much you can rent the property out for – this will ultimately be the deciding factor on whether you put an offer in or not. If the rental income isn’t going to cover all your outgoings – mortgage, rates, any strata fees etc – forget it!

If this is the case, change the area you’re looking in – it might be worth looking at the next suburb along; while the rents will be less, the chances are, your mortgage will be less too, so your outgoings will be less.

4. Potential return on the property

The whole point of investing is to make money, so you want to be sure the property you buy will do this. Once you know the property price, rental income and outgoings, consider the potential return on investment metrics:

• the cash on cash return (amount of cash flow relative to the amount of cash invested in a property investment)
• capitalisation rate (the rate of return on a property based on the net operating income (NOI) that the property generates)
• the rate of expected return (the anticipated amount of profit or loss on the property).

5. Understand the lingo

Familiarise yourself with property investment and real estate jargon. Learn the definitions of key terms and concepts, as well as favourable and unfavourable ranges for the return-on-investment metrics.

Having been property managers for nearly 50 years, we know property. We know what to look for, what to consider and how to maximise rental return to help you get the best from your property.

If you’ve seen a potential investment property on the market, get in touch; we will give you an honest opinion and highlight anything you need to consider. We can also fill you in on how our property management services will make your life easier.

Drop into the Cardiff office or give us a call on 02 4954 8833. Or send us an email at mail@apnewcastle.com.au – we’ve helped many people realise their financial dreams through property and we’re keen to help you.

Check out our Facebook page for other property tips.