How to Do a Property Benchmark

Buying their own home is often what many people would think of when they make their first investment. Investing in properties has been a preferred route to wealth for many.

Your first investment in property need not be your home. You can buy a small apartment for example, and by renting it out, you can save funds, and buy a place that you prefer, in a location that you want to settle down eventually.

A lot of young professionals nowadays are choosing this option. They either choose to live at home for a while longer or rent in their preferred location after buying in one suburb. Properties are less volatile and more stable than other assets that depreciate. However, just like any investment, there are no guarantees property prices would always be up, as they can go down as well.

Here are a few things you need to consider when buying a property:

Capital Growth

Capital growth is the increase of the value of an asset or investment over time. The best way of making sure the value of your property will grow is to buy the right property, in the right location and the right price. Make a research on current property, such as house, location and prices. Talk to real estate agents, and be on the lookout for properties that are on sale or auction.

Income

The yield or income of your property can be calculated by dividing the income generated by the price you paid for it. If you are renting out your apartment, keep an eye on vacancy rates. Tenants will be prepared to pay more if the rental market is tight. On the other hand, if vacancy rates are high, you will have a problem generating an income. You have to choose tenants who will take good care of your property.

Depreciation

Try to consult a quantity surveyor so that you can make use of the correct depreciation allowances.

Location

If you want the value of your property to grow, you have to buy your property in a growth area. It could be a suburb about 3-5 miles away from the city center, or in a town supporting a booming industry. Consider access to transport, shops, malls or other leisure facilities. If you have decided to rent out your property instead of living in it, one factor you also have to consider is your target market. If your target tenant is a family, a big yard, peaceful neighborhood, and access to school would be very attractive.

What to Buy

Consider what you want to buy. Is it a house or an apartment unit? Do you want an old one or new? Units are more convenient and easier to maintain. There are no lawns to keep and preserve. People would prefer a unit with a good view, or indoor laundry. An older apartment or house may not have the modern conveniences of a new one. It would also mean renovation costs.

Financing

You have to consider how you will purchase or buy the property you desire. Some institutions charge a higher interest rate because they might think the risk is higher. Another option is the interest-only loan wherein you just pay the interest and not the principal. An advantage of this type of loan is that interest payments or expenses are tax deductible. Regardless of what you choose, make sure your investment will pay.

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