Property investment can make you rich.
This, surely, might sound like something a late-night television salesperson would say in an attempt to sell his latest book or “free seminar,” but it is a reality. Property, if well harnessed, can be a powerful tool for building wealth. I have seen regular individuals become very wealthy.
In Australia, buying an investment property is one of the most popular ways to invest. It is often seen as less risky compared to other forms of investment.
But, it does have its pitfalls. It’s not like everyone that engages in this trade becomes rich.
Many do not have the patience and “get-things-done” attitude required to build a worthwhile portfolio.
Many start without proper property investment advice and eventually experience the common pitfalls.
Many struggle for years but never build the wealth or financial security that they’ve dreamed of.
So, what is the property investment advice for a new investor– how does someone use property to truly secure his/her financial future?
A few things you need to keep in mind:
What you buy and where it is located will affect the return on your investment. To identify a good property investment,
Know Where to Buy
- Familiar markets– It is best you stick to the markets that you are most familiar with. It will take you less time and money to research.
- In demand suburbs– Look for areas where there’s high growth. It’s in these areas that the potential for capital gains is strongest.
- Rental yield– Rental yield is the percentage rate of income return to the value of the property. Search for areas with higher rents compared to property value.
- Occupancy rates– Low occupancy rates indicate a less desirable neighbourhood. This can make it hard to rent a property out.
- Immediate future– Changes such as proposed developments and zoning affect future property prices. You should find out about these changes before committing.
Know What to Buy
- Great features– There’re a few features that appeal to lots of people, such as a multiple bathrooms, lock up garages, neighbourhood, schools and transport. Look out for those.
- Low maintenance– Rental properties with features such as pools and sprawling landscapes are costlier to maintain. This may play out of your budget.
- Inspect the property– Almost every property will have a defect. Some will be obvious and fixable, others not so much. It’s best to know either way.
Having to replace the roof or hot water service within the first few months of ownership will cut into your profits.
Choose the Right Property at the Right Price
Getting the “right property” is all that matters in real estate. This is due to the fact that most of the time we’re seeking capital growth. The “right property” is the one that is most likely to increase in value. It is crucial to get it at the right price.
Unfortunately, properties are not that easy to price. Most people use the prevailing housing market prices to attach a price to a property in the same hood. Others use predicted growth figures of the neighbourhood.
The key for you is to carry your own water. Do your research. Look at the property listings as well as the median house prices of the area. Speak to as many real estate agents and locals as you can. Look at comparable houses that just got off the market and see how much they sold for. There, you’ll find the gems.
Remember Cash Flow. Do Your Math.
Time and time again, property investing has proven its ability in creation of long-term wealth. As true as that maybe, you need to consider your short, medium and long term goals. You want to make sure that you can afford the costs that come with owning property— the mortgage repayments, the taxes, and the fees.
You will be disappointed to have to offload your property before you are good because of some financial stress.
Take a Long-Term Approach
What you should remember is that property investing is a long-term play. Do not expect property prices to rise straight away right after purchasing the property. The longer you can stay in the market the better. With enough equity, you’ll be able to purchase more investment properties.
Your financial stability is important.
Finally, make sure that you pick the mortgage that suits your needs. Choosing a mortgage is becoming difficult as more players enter into the lending industry.
There are many variations in home loans that are available. There are introductory, fixed and variable rates, with principal and interest, or interest-only repayment methods. Fees and features differ from lender to lender.
As a new investor you have to go into the process armed to the teeth. You have to know the terms of repayments and features that will suit you. You should also know how to compare loans.
If you need someone who can assist you from selecting a great property, getting you the right loans and making sure you have the right strategy, feel free to contact us to discuss how we can work together.
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