It's the last thing anyone wants - you purchase your investment property, and nobody wants it, leaving you out of pocket and forced to reduce your expectations.
You bought a dud.
While there's never a guarantee with any form of investment, there are some steps to take to maximise your potential and reduce the chance of ending up with the best house on the worst street.
First, don't just look at the house, or the street, in isolation.
"Nice street, the lawns are mown, and I can see kids playing."
Drive around the neighbourhood with a critical eye. Look at the quality of houses, the types cars in driveways and evaluate the surrounding area, comparing it to the street you're looking at. Many investors have been caught out buying in the best street, but in a bad area.
Next, don't look at potential if you aren't going to do any immediate improvements.
Tenants don't care about what you're going to do to the property in a few years time, and they certainly aren't interested in potential. If you're looking for a house or apartment with your ideal tenant in mind, be sure to make all the required improvements up front. If you're not going to make any changes for the short term, then you're buying the property for what it is - so be sure to judge it's potential based on that.
Beauty is in the eye of the beholder; and never has this old saying held truer than in the case of property investment.
Where you see a pool and great outdoor living area, parents may see a poorly fenced drowning hazard. Likewise, with granny flats separate to the house; technically they are another bedroom, but it's unlikely anyone's going to put their six-year-old in there.
Consider practical realities, over what's 'unique' or 'interesting.' Again, you tenants aren't purchasing this property and will be thinking more of day-to-day living, than what makes the house stand out.
But beauty does matter. Your tenants may not be buying the house, but they'll still be inviting their friends and family around for barbeques, hosting dinners and having coffee with the neighbours. Nobody wants to live in an unattractive house, and many duds are created through potential tenants driving straight past, or not clicking through on a rental website. Regardless of the market, a house with good street appeal is likely to garner more interest than one which is less appealing. Remember, that moving into a house - even a rental - is an emotional time, and your tenants want to feel that they have more than a roof over their head. If their home is a source of pride, they'll care for it, rent it for longer and do their best to make you aware of any issues.
While nobody wants a dud, sometimes they are hiding in plain sight - and are often disguised as a bargain. Keep in mind that there's more to investment than finding the worst house on the best street, and you'll be able to approach potential duds with your eyes open, and perhaps even turn them around.
Jeff Grochowski is the CEO of Accrue Real Estate, which offers buyers a simple and effective pathway to purchasing investment property in Melbourne, including intelligence mechanisms and market-led advice, predicated on years of experience.
They also offer the opportunity to tap into the ‘underground property market – those properties that aren’t passed to agents and don’t appear on mainstream websites.