Choosing A Property Type

There are many property types. Residential, commercial, industrial…
Whichever you choose for your investment, it is important that you’re comfortable with your choice. Especially if you are borrowing money for the purchase, you probably don’t want to go outside your comfort zone.

I’m a newbie in the real estate investment. So I don’t know much about property types other than where I lived. I left my parent’s house (owned by them) after high school, moved to Australia and stayed in many home stay places where ordinary families gave me a room to sleep and looked after me as a part of the family. I lived in owned houses, owned units, rented houses and rented units by the host families. When I became comfortable living by myself, I rented units, townhouses, or houses. I was a tenant until not long ago. I now live in my first house that I own.

So, my comfort zone for an investment property is naturally residential area. It is said that the yields are not as high as commercial properties, but I think it’s more stable and consistent area to invest in. My personal experience of renting would certainly help to understand what tenants are looking for in residential rental places.

If I have to pick a commercial property right now, I’d have no clue on what makes a tenant wants to rent the property. I know businesses come and go, and 80% of new businesses fail. If that happens to investment property, it could be without tenant for months. I cannot afford to take such big risks at this stage.

Thinking back to residential sector, available types of properties are:

• House
• Apartment & Unit
• Townhouse
• Villa
• Cottage

Based on my study, non-stand alone dwellings like units and townhouses will require handling of strata living. That includes processes of strata titles, meetings, understanding the site rules, engaging site manager etc. Not to mention the fees that come along with each process.

Whenever I start something new, my motto is to start easy. If I hit something very hard or hassle at the beginning, I get easily discouraged and I will soon stop doing what I started.
Investment in real estate is something I just started studying. It involves lots of aspects that I didn’t even know ever existed. I have lots to learn so I want to keep it simple. Dealing with strata dwellings is just extra hassle to me at this stage. So I decided to target in stand alone houses.

Also, another reason of choosing houses as my target is because that’s what I’d like to rent if I’m renting right now. This is important to me because I want to attract people like myself as tenants. There are lots of ‘tenant from hell’ stories out there, but there are certainly decent people out there too. I see myself as a decent tenant if I’m renting a place. I mean, I do normal things normally. I pay bills on time, keep the house nice and tidy, be responsible for what I do (things like caring about neighbors when I make big noises, keeping pets under control, managing rubbish on collection day etc). When I think about what sort of properties people like me would like to rent, it would be a house. Normal families like mine (consists of responsible adults and possible kids and pets) would like a house with a bit of garden. That’s what I thought anyway.

Imagining myself as a tenant helps to pick up a property to buy.
I’d like to rent a place with:

• modern style
• family friendly structure
• small to mid size easy care garden
• walls with natural colors
• off street car space
• fenced area
• lots of storage and wardrobes
• dining area for dinner
• living area with space for a sofa
• relatively new toilet and shower room
• privacy
• short distance to shops
• relatively quiet area

I’m listing all those wishes on a piece of paper and I’m going to use it as a checklist when I go and take a look at a property. Other items I’d check are:

• Roof condition
• Wall & ceiling condition
• Meter box location
• Nearby schools
• Nearby Hospitals
• Parks & bike routes
• Public transport

Also there is a checklist for what I DON’T want:

• Timber frames - they will require frequent repair
• Tall trees too close to the house - the roots can ruin the house base and it can knock the house down when it falls, leaves clog the rain waterway on the roof
• High maintenance extra features like spa
• Expensive to fix electronic devices - i.e. advanced security alarm system
• Gyms - Gym classes make lots of noise early in the mornings and evenings
• Function halls - especially wedding venue. You won’t have a good night sleep on the weekends of a wedding season
• Pubs - Drunken people would shout and fight at night
• Bottle shops - Similar reason for pub
• Rails - the noise, the shakes from trains. You want your kids and pets to be safe staying outside.
• Highway - similar reasons for Rails

One more important tip is to look around the neighborhood. You can get a pretty good idea of the quality of the neighborhood by looking at their houses and gardens. Messy gardens, overgrown lawns, half peeling paints on the walls… They might be a temporary state of your neighborhood, but if the whole street is full of houses like that, I’d stay away from the street. If I can talk to the existing neighbors, I’d ask about the house I’m interested in and also about what the area is like.

After all,

You cannot be too careful to pick a residential property!!

I hope this helps other new investors too