Investing in property is nothing new but buying an investment property can be an overwhelming decision. Investing is a choice that many people make at one point or another with the hope of bringing wealth and a steady income to their lives. Many Australians either already own real estate, or are looking to delve into the market. There are many other investment financially alternatives including bonds, cash, and stocks; however property investment is viewed as one of the easiest and safest options. An investment property should be about increasing your wealth and securing your financial future. However, property investment isnâ€™t for everyone. There is a common misconception that property investing will always deliver positive returns. This is true most of the time, but it certainly isnâ€™t a way to grow your wealth overnight or an instant road to riches. You also need to remember that your success depends on how effectively you manage your investment and whether or not the investment helps you reach your financial goals. If you are considering diving into this venture, it is important to weigh up the pros and cons.
Pros of investing in property
- Capital growth: The value of your property will increase over time and may be extremely beneficial financially if chosen well. You will benefit from steady capital growth as well as regular monthly returns. You will also benefit from capital growth when you decide to sell.
- A safe investment: This investment market is the only one not dominated by investors. If you purchase a house in a bad area, chances are that the house’s value will still grow over time.
- Less volatility: Property can be less volatile than shares and other investments.
- Mitigate risk: You can claim insurance on your property against most risks such as fires, damage, or a tenant leaving.
- Anyone can invest: You donâ€™t have to be extremely knowledgeable unlike with stock investment or opening up a business.
- Control: You are in full control of your property investment unlike other investments. You can make all the decisions and have control over all your returns.
- Tax benefits: If your property is negatively geared, it may provide tax benefits.
Cons of investing in property
- Liquidity: Selling your property takes time as isnâ€™t as quick as other investments such as shares.
- Hidden and ongoing costs: You will need to consider the ongoing costs such as maintenance and repairs, water rates, land tax, etc. along with the initial costs of investing in property.
- High entry and exit costs: Expenses such as stamp duty, legal fees, and real estate agentâ€™s fees make buying and selling expensive.
- Vacancy: Whenever your property is vacant, you will still need to cover the mortgage repayments.
- Bad tenants: Problematic tenants can damage your property, refuse to make payments or even leave the property. Disputes can sometimes take months to resolve.
By weighing up the pros and cons, it can help you decide whether or not property investing is for you. Many people quit before they even begin because they get overwhelmed by the process. As a long-term investment, there as many advantages, there are also the risks and pitfalls you need to be aware of. If you are interested in investing in property, here are some tips to help you get started.
1. Know your finances
Before you even think about getting into the world of property investing, it is vital to have a thorough understanding of your cash flow. This can be done by listing all your assets including incomes and working out your expenses. By doing so, this will give you an idea of how much cash you have available to invest. Donâ€™t assume you canâ€™t afford to invest if you think you donâ€™t have enough cash to put aside for this venture. As long as you have a stable income from a relatively good paying job with a solid employment history, you should be able to get a loan.
2. Get a pre-approval
Getting a pre-approval for your investment loan will allow you to know how much youâ€™re able to borrow before you start looking for properties. You can get a pre-approval directly through your lender or through a trusted mortgage broker. A mortgage broker is an intermediary (usually a bank) working with a borrower and a lender while qualifying the borrower for a mortgage. By going through a broker before applying for a pre-approval can be beneficial if youâ€™re not sure youâ€™re ready to invest financially. Finding out if you qualify for a loan, checking your credit rating and reducing your debt or credit card limit will help in getting a pre-approval.
3. Set realistic goals
Figure out what exactly you want to achieve. Are you looking for fast capital growth or wanting a long-term investment? What does success look like to you? The majority of property investors typically invest to secure their financial future or to be in control and do what they want, when they want. In order to achieve your goals, you must set out what they. By setting realistic goals, you can slowly work towards fulfilling them. It is also a good idea to set deadlines on when you want to achieve these goals. This way you will be more motivated to reach your objectives you set out at the beginning. During the property investment boom periods, itâ€™s easier to renovate properties and turn them over for a quick profit, while in slower economic times; it may take years to achieve the same kind of growth.
4. Start budgeting
Even though budgeting may seem boring and uninteresting, itâ€™s the only way to ensure youâ€™re able to balance your income and expenses. This way, youâ€™re able to see where youâ€™ve been spending your money and help you to plan for larger expenses in the future. Make sure you also budget enough for rates, insurance and general repairs. You shouldnâ€™t underestimate ongoing costs because if youâ€™re not on top of it, they will eventually pile up and get out of hand. When you have purchased your properly, it is a good idea to prevent costly maintenance problems from arising. This can be done by replacing ageing taps to prevent leaks or repairing any cracks that could potentially become a hazard later down the track.
5. Pick the right mortgage type
There are a lot of options when it comes to financing your investment property, therefore it is essential to get sound advice as it can make a big difference to your financial well-being. Choose a mortgage that suits your needs and requirements. Whether you choose a fixed rate loan or a variable loan will ultimately depend on your situation, but it carefully consider your options before you make your final decision. Variable rates have proven to be cheaper over time, but choosing a fixed rate loan at the right time can be beneficial and really pay off. Professional financially advice should be sought if you are unsure about your options or need help deciding which option is best for you.
5. Choose a property carefully
Try to choose an investment property with functionality and in a growth area where there is strong demand for rental accommodation. Firstly, buying a property in a convenient location close to public transport, shops, schools and universities will make it more financially attractive to people looking to rent. Donâ€™t get swept away with buying a luxurious house with unnecessary features. In the end you are looking to rent this property that only has to be clean and functional. Think carefully about the location and features of the house. It may not be worth buying a house with a great financially view or a swimming pool because of the extra added costs. Make sure you weigh up the pros and cons before making your final decision.
6. Be informed and stay focused
Use the tools and resources available to help you make an informed choice. Knowing the market can be important to making the right investment decision. If you decide to seek help and advice from a professional, research prior before choosing property advisors. Weigh up the costs and fees associated for the service. You can also attend property investment seminars to learn more about the market and how else you can efficiently and effectively financially manage your property. Increasing your knowledge in this field can help you keep costs low and gain a higher return. Property investing is a business decision, so itâ€™s crucial that you stay focused. By doing so, you could be enjoying the returns on your business venture 10 or so years down the line.
Whether you are interested in buying investment property in Melbourne, Sydney, Brisbane or Perth, Lime Property Solutions are here to help you out. We are a comprehensive investment company which makes property investment easy for our clients. We provide sound, professional advice with over 30 years of combined experience sourcing premium investment properties. We offer a unique property investment strategy based on your personal circumstance and organise all your support services for now and your future. Your success is based on the fact financially that we understand your individual needs and treat you accordingly. Get started today and achieve your goal of successful property investing to secure your financial future.