A small property could potentially make a great investment, provided you choose the right one. The key to success with any investment property is thorough research. In this article, we take a look at how to research and choosing the right small space property to give you the investment returns you’re looking for.
Pros – why choose a small space apartment or unit?
There are lots of benefits to buying a smaller property such as an apartment or a unit. Houses often have a higher entry price point due to land value, so you could potentially buy an apartment or unit with a smaller deposit. Ongoing costs for apartments and units can be a lot less too – council rates are usually higher on a house and in many states, you’re also required to pay land tax on an ongoing basis. With a unit or apartment, costs are limited to strata and body corporate fees.
Maintenance is also a cost that must be taken into consideration. If you purchase a house, all maintenance issues are your responsibility, whereas with an apartment or unit, many of these costs are covered by the body corporate.
These factors mean that a unit or apartment may be more favourable from a cash flow perspective – which is great, particularly for first time investors. Additionally, if you do your research carefully, you could potentially locate an apartment or unit in a location set to make both great capital gains and solid rental returns.
Cons – how small is too small?
Some developments offer studio and one-bedroom apartments of less than 50sqm. Many lenders are reluctant to finance these properties, and also some small space properties in high rise, high density developments, so it pays to discuss any property you may be considering with your mortgage broker before you sign a contract or put down your deposit.
Research is the key to success.
So how do you know for sure that a location will be in high demand for small space renters in the long term? Small space apartments and units are often in high demand in locations that are close to the action for singles! These may include the city centre and other busy employment hubs, universities, areas with vibrant nightlife, or excellent public transport facilities that provide fast and easy access to these amenities.
To find out what you need to know about a particular location, start by talking with local real estate agents and property managers. Essentially, you’ll want to find the answers to these questions about your chosen location:
There are useful online resources where you can access market reports on specific areas. If you’d like to find out more, chat to us and we will assist you further with your property research.
How to analyse the market data.
You’ll want to analyse the data you collect to find a location with positive capital growth and solid rental yields to maximise the profit potential of your investment. (If you need help, please ask us as we have a great deal of experience.) Some other good indicators of these include:
Ask us to help you crunch the numbers!
There are always reasons for and against investing in any type of investment property. The right investment choice for you will depend on your financial position and investment strategy. If you’re considering investing in property for the first time, a small unit or apartment could be a good way to start, so ask us to help you crunch the numbers to see if they add up.
Remember, we can be an invaluable resource when investing in property. We’ll help you choose the right loan that will not only serve your needs now, but set you up for further investments in the future. Talk to us today – we’d love to help you get started with a little property investment.
The material on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this website is General Advice and does not take into account any person's particular investment objectives, financial situation and particular needs. Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this website are provided for illustrative purposes only. Although every effort has been made to verify the accuracy of the information contained on this website, Infocus, its officers, representatives, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.