5 key metrics when checking out an investment property

Hi there,

When looking online for your ideal investment property I'd like to understand what the minds of successful investors think about when seeking out a place.

The 5 traits I have so far is :

- Value
- Capital Gains Potential
- Yield
- Diversity
- Past performance of the suburb

Some others in my mind
- Location
- Quality of House (Visual Inspection)
- Land Size

Would like to know where these or any other metrics may rank in your top 5.

Cheers,
Shawn

 

I think one key things is to ask an the agents in the area as to who are the type of tenants ie tenants with Centrelink assistance was something new to me.

Also consider if the market is a renter's market ie lots of available options.

Proximity to transport - rail/bus
How many schools

 

One of the biggest ones not mentioned above .

Add value potential .

 

Hey there.
IMHO, out of your 5 traits, value, CGP and Diversity are very subjective and vague to define and measure.
using past performance can be down right dangerous if not done properly.
Yield might be the only one that have some value.

You will arrive at with value and CGP when you assess the location, quality, land size, yield, comparable recent sales , present and near future infrastructure and services.

In other words, CGP and Value shouldn't be one of your matrices, it should be the outcome of your calculation in your matrices.

 

For me, I've narrowed it down to 4 key factors when I initially look at an IP:
1. Good Yield – Gross yield of X% or more
2. Excellent Location – close to good school/public transport/major shopping centre hug/major upcoming infrastructure such as new hospitals or university
3. Contains scope for value add – such as cosmetic renovation, granny flat potential, build out downstairs for highsets
4. Contains future development/subdivision potential – allows the block to be developed or subdivided at a later stage

What I would do as a deal comes up I would assess it first against these 4 criteria and for me to consider the next level of DD it must meet at least 2 criteria out of the 4. But in general the more the better…if you can find something that ticks all 4 then it’s a cracking deal!

I've covered in more detail on one of my posts:
What I learnt out of buying 7 properties

Next level of due diligence then revolves around focusing on the X factor identified. For example, if it's a good cashflow property from day 1 then I'll be looking at how to potentially extend the yield even further - for example is there an opportunity to add a granny flat down the track? So each IP in my portfolio has a defined purpose.

Cheers,
David

 

I always considered the employment opportunities and transport links for tenants to get to work.

I preferred my tenants to be employed.
Marg