Article by: Matthew Hughes, Founder & Managing Director of Capital Property Advisory
For many investors, their long-term investment strategy is to increase wealth to ensure their financially successful future. For this reason, a lot of investors opt for a capital growth investment strategy, finding properties with potential to outperform market returns over a period of time. So what do these investors look for to maximise their capital growth?
Location, location, location
Any property expert will tell you location is one of the biggest factors at play when identifying and purchasing a property for capital growth. Properties located within a desirable school zone, and those close to public transport links and local activity or employment centres are more likely to attract the interest of future buyers, renters, and developers. With an increasing number of tenants and buyers seeking areas that meet both their work and social needs, walkability is now playing a key role in determining the value and demand in these areas. Savvy investors will buy properties in areas with existing or developing travel links and major activity centres. By leveraging on local accessibility, these investors increase their capital growth in the long term, whilst managing their risks in the short term. Finding a property with future infrastructure mapped out can significantly improve capital growth prospects; however, be careful when “gambling” on proposed projects that are yet to be formally approved.
Condition of the property
When purchasing a property for capital growth, investors need to consider the condition of the property itself. Properties that have undergone recent renovations are likely to achieve higher rental yields and sales price. However, investors will also need to take into account the extent and quality of the renovation – was it a low budget project that will require further work in the future or a high quality renovation built to last? Likewise, if investors plan to purchase a low value property with potential for renovation, they will need to consider the cost of renovation required. The worst thing a buyer can do is purchase a property that requires significant structural renovations which are outside the scope of their budget and won’t see the return they are after. This is where enlisting the help of an experienced buyer’s agent and/or project manager can help investors make the right decision (or escape the wrong one) on an investment property.
Investing in a property for capital growth isn’t just about looking at existing amenities, it’s also about looking ahead. Are there any up and coming developments or planning policies likely to influence the future value of your investment property? Upcoming developments and planned density increases are key triggers for commercial and residential growth, and can have a huge impact on the value of housing in Perth’s suburbs. The astute investor will research and understand how developing infrastructure will impact the value of their investment property in the short and long term.
Perth’s property market can have a huge impact on the value of an investment property both at the time of purchase and at the time of sale. Investors seeking a property with long term growth potential will need to consider how Perth’s property cycle will influence both the current and future value of their investment property. Purchasing a property in a subdued market can have huge benefits for investors seeking to make the most of capital growth. This allows the opportunity for investors to purchase a property below market value before profiting from increasing housing value as the market heads towards recovery.
The right financing
Before purchasing a property for capital growth, investors need to consider how they plan to fund their new investment. As opposed to properties with high rental yield potential, capital growth properties don’t always bring immediate returns. More often than not, these properties will be negatively geared, meaning investors need a way to cover their expenses and finance their investment venture in the short-term. Choosing the right type of loan structure is key to ensuring investors cover their short term costs and create a secure foundation to build their property portfolio.
Purchase the right property with the help of Capital Property Advisory
When it comes to purchasing a property with high capital growth potential, the expert insight and advice of a buyer’s agent backed by an experienced research analyst could be key to ensuring you make the right investment. At Capital Property Advisory, our experienced Perth’s buyers’ agents have an in-depth knowledge of Perth’s property market, and can apply our market knowledge and experience to ensure you purchase the right property to suit your new home, investment or development goals.
Organise a consultation with our experienced Perth’s buyer’s agent today.