As Sydney’s property boom winds-up, it appears that other locations around Australia are poised to step-up and claim their fair share of price growth. So for those looking to invest, success will depend heavily on where you choose to invest.
Property Investment Steps for Buying in 2016
For investors who are keen to buy, realtors and financial advisors suggest that you follow a number of strategic steps. This will allow you to avoid buying pitfalls and to buy with confidence. These steps are as follows:
1. Develop your own investment plan
Don’t start your investment portfolio by looking at property. Before you get to this stage you need to know why you’re buying, what goals you hope to achieve by buying and how you can reach these goals. It’s also important for you to define a timeframe to achieve your goals. Your other consideration should be the type of investment you wish to purchase. Most investors think passive, where you buy a property and then rent it out, but there are many other tactics that you can choose. However, we’ll focus on simple property investment for now.
An investment plan should list the following:
A reason for buying.
What goal(s) you are seeking to achieve.
How you will achieve this goal(s).
The timeframe you’ll achieve this goal(s) by.
An example of a property investment plan might look like this:
Reason for buying – Retirement.
Main goal – Financial freedom/ self funded retirement.
How to achieve this goal – Buy investment properties. Pay these off before retirement and then live on the rental income. This will mean purchasing a mixture of high rental yield property and property that has high capital gains over the years before retirement. Then just before retirement the properties that have the highest capital gains will be sold to pay-off the high rental yield properties.
Timeframe to reach goal – 15-years.
2. Be willing to pay for good advice and research
Successful investors who own more than 20 properties typically spend money to make money. They treat property investment as a business. These investors will pay $50 for a research report, $500 on a property valuation or $5,000 on professional advice. A wannabe investor, on the other hand, will scrimp and save. However, if you’re just starting out as an investor, then it’s important to be financially conscious. Don’t buy reports or get property valuations on property that you’re not seriously wanting to buy. Also know what your budget is before you start looking at property.
3. Build a team of experts
Mortgage brokers, researchers, property advisors and an accountant, who understands property investment, are essential to your success, along with conveyancers (property lawyers) and depreciation experts.
Research is vital to make well-informed decisions. Don’t read newspapers and follow the media. Instead, ask a financial expert who deals in property.
At present, the media are running story headlines that read, ‘Boom is Over’ or ‘Investment is Dead’, ‘No-one can Afford to Buy Property’. But, the truth of the matter is some areas will continue to boom, investment is still very much alive, and many people can still afford to buy property. If you’re looking for accurate information, then read publications that specialise in real estate, such as the Property Observer, RP Data CoreLogic, and Realestate.com.au or Domain.
4. Look for prime locations that tick your boxes
Some locations will be capital growth orientated, while others will produce a high rental yield. An area that experiences high capital growth is typically influenced by the local economy and infrastructure, this, in turn, will push-up demand, along with property prices. Sydney, for instance, had not witnessed price growth for approximately 10 years before its boom. The region had poor infrastructure and the economy was poor. The government changed power and Sydney started to pick-up. The new government spend money on infrastructure and began creating urban hubs, the economy began to pick-up along with property prices. Prior to that rents had increased by 70% over the 10 year period and property prices by 15%.
5. Beware of high rise units
There’s a lot of these types of properties’ on the market so this means that there is an oversupply. An oversupply typically devalues a property’s price. It can also lead to rising property vacancies and falling rents. Danger high rise markets that you should avoid buying in can be found in Melbourne, Central Brisbane, Central Perth and on the beachside Gold Coast.
For property investment success in 2016, investment experts recommended that you should stick to the residential market. Buy established property, and check vacancy rates and building approval data. This will allow you to gauge how many units are expected to be constructed. Also, remember that each new unit that is constructed in an area you are looking to buy an investment property in represents rental competition.
Are you interested in knowing more about investment loans? Then contact eChoice, we can help YOU find an affordable home loan.