The Most Important Tip for Buying Investment Property / Rental Property

Here’s the most important tip for buying an investment property, especially a rental property to guarantee you get a good cashflow and stable bank balance:

Unique Selling Proposition

For common case, this would be “location, location, location”. But it is not necesarily true for all. Why? Read on…

First, let us understand what the Unique Selling Proposition (USP) is.

Put yourself in your potential renters’ mindset. Obviously, when you look for a house to move in you would be having a reason, a purpose. Think about ones that apply to the decision maker (easy for singles and young people, but for larger houses you need to think about the head of the family: fathers and the males in couples). This may well be:

• To be closer to a destination (most common for the decision maker: university, work)
• To be convenient (close to shopping malls)
• To be in the city centres (CBD); especially applicable for apartments
• To enjoy life (availability of large ground/garden, swimming pool and spa pool)

Once the primary motivation (one of the aboves) is satisfied, other reasons/objections would become a distant second consideration. This would include: rent, condition of the house and the number of the bedrooms). The only exception would be parking, as disposing a car (if no parking is available) is not usually desireable (a lot of people has personal attachment to their vehicles).

Looking at that, your investment property would have to absolutely satisfy the following primary conditions:

1. Very close to something important (choice: University, CBD, significant/large Shopping Malls).
2. Have a unique feature that is of very high value (very large garden where dogs and kids can run around, swimming pool that they don’t need to expensively maintain; which you may need to maintain instead)
3. Parking

Secondary conditions are only to ensure very easy rental or high rent price, but this is not a requirements:

1. If you are willing to live in that house (i.e., if it is not disgusting) then a million other people would be willing too.

Suffice to say, if you buy a house in the middle of a suburb without any nearby University, and the house is not exceptionally special, you’d be hard pressed everytime you need to find a renter.

In this unfortunate situation, price may be your only recourse. But remember, when you come down to playing with price, there is always someone willing to sell cheaper than you.

Chant this mantra with me: it is better to have something that 3 people are very interested in paying whatever it takes, rather than something that is interesting to 1 million people but noone is willing to pay much for.