What should investors look for during an open inspection?
Searching for an investment property is quite different to finding a potential dream home.
It’s easy for investors to become emotionally invested as they often become attached to certain features that they feel are necessary to live in the property. While liveability of a property is still important for potential landlords to consider on behalf of their would-be tenants, there are a range of other factors to consider when walking through an open house to determine if a property is appropriate to become an investment.
Choose a property in an appealing location
Choosing the right investment property isn’tjust about looking at what features it has on the inside, it is also important to consider the location and its facilities.
When driving to an open house take note of what facilities are close by. Nearby schools, shops, cafes and healthcare services are all factors which will appeal to potential tenants.
Another indication of whether a property is suitable could be the condition of the houses nearby. If houses in the street are looking drab and experiencing wear and tear it could be harder to secure a tenant. Safety of the area is a factor for both tenants and landlords, so think about this as you drive up to the property. Insuring a rental property is necessary and if an area is unsafe this could also push up your insurance premiums.
As you pull up outside consider whether the property has street appeal. If it doesn’t entice you to want to look inside, there’s a good chance that it won’t get a potential tenants attention either.
Do your due diligence when inspecting inside
Before you attend an open house, it is worthwhile creating a list of the features you are looking for. As you visit a property tick off the pros and cons and take notes. These can later help you with the decision making process.
Consider the size of the bedrooms and living areas and determine if any are too small.
Look out for any necessary repairs and maintenance or renovations that might be required straight away before renting out the property. Unless you are prepared to complete a renovation and have the budget to do so, work required may be an additional expense you want to avoid. If you are prepared to do some work, factor these costs in when budgeting what you want to spend when purchasing the property.
If you like a property on first inspection, go back and visit it again at a different time so you can take notice of the natural lighting and the way the sunlight enters morning and late afternoon. The direction of the house and whether windows or doors allow sunlight and air flow is important.
Before making any decisions, enlist the assistance of a building inspector, pest inspector and a plumber to check for any structural issues, problem pests or signs of leaking or rusting pipes and gutters.
Finally, ask for a list of what items the previous owner will be removing from the property and what will remain. It’s helpful to determine which assets will be included in the purchase that will later have depreciable value.
What should you be looking for?
There’s a whole lot you can find out about a property, either by checking it out yourself in person during the inspection or asking the on-site real estate agent (or both). Questions worth asking and issues worth checking for include:
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What direction does the property face? Keep in mind a west-facing property may get very hot on summer afternoons, while a south-facing property could get chilly in winter.
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Is there much natural light throughout the day?
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Are the bedrooms sufficient in size?
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Is there enough cupboard and wardrobe space?
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Do the windows and doors open easily?
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Do the windows have fly screens, if none, are there ceiling fans/aircon?
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Is there mouldy, damp or rotting areas on the skirting boards, walls, ceilings or floorboards?
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Has the property recently been painted?
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How strong is the water pressure? Does the hot water come through quickly?
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Is there evidence of rust or other damage in the pipes?
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How old and big is the hot water system?
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Are any of the light switches loose?
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Do the roof, guttering or drain pipes look old or in need of replacing?
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Are there any cracks in the interior or exterior walls? If they run long or deep, ask the real estate agent to flag them should you go ahead with a building inspection later on.
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Is noise likely to be an issue from pedestrians, traffic or aircraft? It could be worth returning to the property at a different time in the day to see how much quieter – or noisier – it can become.
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How much space does the property have from the neighbours? Are they likely to be noisy?
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Are there any odd smells?
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Is there a garage or assigned parking? If not, how easy will it be to park on the street and are there any restrictions?
Discuss the potential income and expenses with the Real Estate Agent
One of the most important factors to consider when purchasing a property to rent is to discover what income and costs are involved.
The real estate agent selling the property will be able to provide you with an assessment of the potential weekly rent and examples of what similar properties in the surrounding area are currently being rented for.
To get a more comprehensive idea on whether a property will be financially viable, discuss what costs will be involved in holding the property with the Agent. Determine the potential yield you will receive after expenses such as regular repairs and maintenance, property management fees, council rates and interest on are factored in.
Investigating what costs will be involved at an early stage can be helpful before you get your heart set on one property in particular.
Even if you are purchasinga property from another agent, it is always good to get a second opinion from a local expert. Feel free to speak with Kenny Leung to help understand the rental market condition on the Upper North Shore.
Have a question about your investment property? Speak with our property management team today.
