Investment bought for $530K – Up 22% after 16 months at a 4% yield
Yes, it sounds too good to be true, or like a one-off investment win because it’s nowhere near Melbourne’s average stats – That’s because it’s not an average buyer doing the search. It is possible to achieve positive capital growth and rental returns if you are willing to invest in proper due diligence and a healthy amount of time and effort, Scott Hall, Buyers Agent from Cohen Handler’s Melbourne Office explains….
For anyone looking to invest in property, it is important to start by developing a carefully thought out search criteria that identifies the key drivers of capital growth and the opportunity for a rental return significantly in excess of the suburbs average.
The Melbourne property pictured above was bought at $530,000 and increased 22% in 16 months on a 4% yield. If you would like similar results we show you want to look for and the steps involved in smart property buying for the best return:
Right Suburb at the Right Time
For investors and home buyers, the possibility of gentrification of an area—the migration of higher income households to lower income neighbourhoods—is seen as a smart long-term decision offering the ability to buy into an affordable area that could offer capital growth over time.
The example house is in a rapidly gentrifying inner north suburb less than 12 km from Melbourne’s CBD. The suburb is increasingly popular with young home-buyers who are looking for a ‘still affordable’ inner city lifestyle. Its pricing growth is supported by buyers priced out of nearby suburbs to the south. In addition it is well serviced by public transport, which continues to be a key driver of a suburb’s desirability and will only increase as Melbourne’s population continues to grow.
Be in the Right House in the Right Suburb
Scarcity is a powerful driver of both capital growth and rental return. The property is clearly superior to the two bedroom stock commonly available in the suburb due to its thoughtful configuration. It has two generously sized bedrooms split over two levels, two bathrooms, an open plan kitchen/living/dining and a study nook. In addition, there is internal access to the garage, and a good sized outdoor area that gives it a ‘surrounded by the outdoors’ feel thanks in part to its large block and location across from a park.
Really Know the Local Market
This requires you to physically visit the market yourself for a sustained period including committing to looking at properties every week and understanding not only the comparable sales within the suburb but any changes that may affect the desirability of a suburb. These include but are not limited to:
- infrastructure changes – both planned and under construction, e.g. transport, recreation, schools,
- local announcements like rezoning,
- demographic change – who is moving in and who is moving out?
- newly opened cafes and stores,
- What is happening in neighbouring suburbs?
- Council statistics on increasing population and incomes, decreasing unemployment and improving levels of education among residents and
- Council and Chamber of Commerce activity and news.
Comparable sales at the time of this property’s purchase were in the high $500,000s to low $600,000s. Our client intends to hold the property in their investment portfolio for the long term and use it as a solid foundation for future purchases.
If you are interested in purchasing an investment property with good rental returns and capital growth, the expert property agents at Cohen Handler can help you find the right property at the right price. Contact us now.