How do I choose the right investment property?

Ask any experienced investor and they will advise you that choosing the right investment property essentially comes down to being as well informed as possible – which means doing your research.

Of course, that is easier said than done. With so many factors to consider and assess, it can be hard to know where to start and what to look out for.

With new and off-the-plan property, this can be even more challenging, as you are dealing with property that is yet to be built and a process that is unfamiliar to many.

At Ironfish, we specialise in off-the-plan (OTP) and have been helping Australians invest in this market for over 12 years.

One of the major ways we differ from your average agent is that we do not take on any and every property listing we’re offered.

Our in-house property and research team works hard to identify great up and coming locations, and great properties within those locations.

Whether you’re a first home buyer looking to take advantage of the many government incentives on offer or an investor looking for a contemporary property that will suit the lifestyle needs of a future owner or tenant; there are many reasons why OTP may appeal to you.

To help understand what types of factors to consider and assess before purchasing off-the-plan, our Head of Property, William Mitchell, has kindly shared some insights into the property selection process Ironfish undertakes for our investors.

How do we select properties?

Ironfish has a national footprint, which means offices –  and property recommendations – in all the major cities of Australia. The property and research team, therefore monitors all the major Australian capital city markets to identify:

1. Which suburbs we believe will outperform the wider capital city market

There are many factors to monitor and assess to be able to identify a suburb with strong growth potential. Some of the key factors we look at include:

• Is this sub-market undervalued?
• Is it undersupplied?
• How affordable is this sub-market?
• What types of infrastructure projects are planned which may benefit the area?
• Is jobs growth strong?
• Are there any major demographic shifts occurring which will affect the sub-market?
• Is population forecast to grow significantly? If so, why?

Once we’ve established a strong location, we next look to identify:

2. Which developments are likely to outperform within that suburb?

Once a target suburb has been identified, it is then a case of analysing each development within that area, and determining which development we believe will outperform within that suburb.

“Having a point of difference in the market is key to this. If we can find a project that has an “X-factor,” we get very excited,” said Mr Mitchell. “This might be really strong integration with retail and transport, or a new product type that the market hasn’t seen before, or a location that will benefit from spectacular views. If a project has a strong X-factor, it will usually separate itself from the pack, and we believe is likely to have stronger appeal long term, both from tenants and owner occupiers.”

3. Quality is paramount

At Ironfish, a commitment to quality is part of our core values as a business. This not only means providing quality service, it also refers to working with quality brands and being associated with so many award-winning properties.

So when we’re looking for a development likely to outperform within a suburb, we want to make sure the developer has a legacy of delivering quality properties. This means a developer with a strong track record and a shared commitment to delivering quality products and services.

A quality property is much more likely to appeal to a high calibre tenant, experience minimal maintenance issues, and will also have strong future owner occupier appeal. This is an important factor, when it comes to selling the property in future and is also one of the reasons why we like to do ‘The Floorplan Test.’

“If a developer can’t tell me straight away where the TV and sofa should be positioned on a floor plan, that tells me that they really haven’t put much thought into how people will live and occupy that space. We look for properties with an owner-occupier appeal, which means they must be designed with the end-user at front-of-mind,” said Mr Mitchell.

Behind the scenes

In addition to the developer’s track record, we also investigate:

• who is financing the development
• who is the builder; some developers have their own builder and some use one or more contractors. We like to know the builder is a preferred builder, rather than a second, third or fourth choice.
• what kind of pricing; is it too expensive? Or is it too cheap?! When it’s too cheap, it may well be ‘too good to be true.’

 

Property factors

In terms of the property itself, we research the following key factors:

• Affordability

As much as we’d all love to buy a harbour-view penthouse, this is simply not a reality for most of us. So another of our criteria is that the property is affordable and represents, in our opinion, good value for our investors

• View lines

This is quite important with off-the-plan property, as it’s not simply a case of being able to see the view for yourself.

• Inclusions

What types of inclusions are being offered to our investors.

• Terms of the contract

Again, are these terms favourable for our investors?

• Transport and other convenience and lifestyle appeal.

 

“These are just some of the main factors we look into when selecting properties to take on and recommend to our investors. There is a lot more detail, and a lot of what we call ‘off-market intel’ that helps us identify opportunities that others simply don’t have,” added Mr Mitchell.