Choosing the perfect neighborhood for your investment property: A comprehensive guide

While investing in property is still a good option for financial growth, the key to a successful investment lies in selecting the right neighbourhood. We take a look at what you need to take into consideration when choosing a neighbourhood for your investment property.

Consider the overall quality of the neighbourhood

If you're entering the rental market, the quality of the neighbourhood is paramount. A good area attracts better-quality tenants. Investing in a smaller property in an excellent area is wiser than the largest house in a subpar neighbourhood.

Vacancies and demand

Research the number of properties available for rent in your target suburb. A high demand for rentals typically allows landlords to charge higher rents. Be cautious of neighbourhoods with many available properties, which may lead to increased competition for tenants.

Evaluate the average rent in the area

Ensure that the rental income in your chosen neighbourhood covers your loan repayments, capital investment, and other property-related expenses. Understanding the average rent helps you make informed decisions about the financial viability of your investment. We advise involving a local property professional who not only understands the market but will be able to assist you in finding the right property for your investment needs.

Account for property taxes and levies

Property taxes and levies are inevitable costs that can impact your rental income—research council taxes and, if applicable, the monthly levies charged in complexes or estates. Higher facilities often correlate with higher levies.

If you are contemplating an investment property in a sectional title scheme make sure you understand all the rules and regulations that would apply to you and your tenants. Also, ensure that you ask for financial statements and check that all the rules are registered at the CSOS.

Know the resident demographic

Identify the type of tenants you want to attract. Your property should align with their preferences and needs. The needs of a family will differ from a young professional just starting out - understanding this will help you understand what type of property and area you will need to look at. Consider existing demographics as well; proximity to a university may attract students rather than families, for example.

Check the crime rate

Safety is a crucial factor. Investigate the crime rate in the neighbourhood and surrounding areas. Engage with locals and inquire about neighbourhood watches, security patrols, and overall safety measures.

Proximity to schools

If your target tenants are families, proximity to good schools is essential. The closer your property is to reputable schools, the higher the rental potential. Families are less likely to move if their children are enrolled in nearby schools, reducing tenant turnover.

Evaluate amenities

Consider the amenities that align with your target tenant demographic. Families may prefer properties near community shopping centers and parks, while young professionals may seek modern, convenient properties close to shops and restaurants.

Assess fittings and fixtures

Modern, functional, and easy-to-maintain fittings and fixtures, especially in kitchens and bathrooms, contribute to the appeal of your property. While luxury may not be necessary, a contemporary design is likely to attract a broader range of tenants. While you are doing this keep in mind that most tenants will need to be able to have access to reliable internet - so check the coverage in the area and assess if this will be a bonus to your tenants.