If you travel back in time and rewind 30 years, you’ll notice that the average Australian would rarely dream of buying an investment property. However, real estate investment began to steadily increase throughout the 90s and 2000s. These days, based on the latest data from the ATO, around 20% of Australian taxpayers are investing in property.
Why Consider Buying an Investment Property?
Why are so many people buying an investment property these days? Investing in real estate offers some serious advantages, including:
- Potential appreciation in value
- A source of income through rental yields
- Possible tax benefits
Historically, property values in Australia have increased over time, making investing in property a comparatively “safe” way to grow your wealth. That’s why investing in real estate is considered by many to be a strong and stable financial plan.
Set Realistic Goals Before Investing in Real Estate
When you know exactly what you want to achieve – whether it’s steady rental income or long-term appreciation – you can tailor your property search to match those objectives. For example, if your goal is regular income, residential properties may be ideal. Commercial properties, on the other hand, might be better suited to those aiming for long-term growth. Having a clear goal in mind will help you to invest wisely, aligning your choices with your financial objectives.
Do Thorough Research Before Buying an Investment Property
Once you’ve established your real estate investment goals, you’re ready to start house hunting, right? Not exactly. It’s important that you thoroughly research and understand market trends before making important real estate investment decisions.
What kind of factors should you consider?
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Capital Growth
Check that the area has strong growth-trend indicators. What is the median house/unit price in the area? Has that price gone up over the past 5 years?
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Vacancy Rates and Rental Yield
Research local vacancy rates for rental properties (a high vacancy rate is a bad sign) and check what the average rental yield is for real estate investment properties in the area.
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Investment Location
Remember that you’re looking for a location that will appeal to tenants. Access to schools, shops and public transport are big drawcards, whereas proximity to heavy industry or airports may be a deterrent.
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Property Type, Age and Features
Units will be cheaper to buy initially, but how much are the strata fees? A house may cost more to buy and maintain, but will that be offset by higher rental yields? An older property is typically more affordable but comes with higher maintenance costs. Finally, certain features (such as additional bathrooms or a garage) will allow you to charge more.
A local real estate agent can often provide valuable insights into what kinds of rental properties are popular and which areas are experiencing low vacancy rates.
Financing Options for Investing in Real Estate
When buying an investment property there are several different financing options available:
- Mortgages: Traditional loans for buying residential properties, with fixed or variable interest rates.
- Interest-Only Loans: Where borrowers pay only interest for a specified period, reducing initial repayment amounts.
- Home Equity Loans: A loan that uses existing home equity as collateral for a new loan.
- Line of Credit Loans: A flexible loan allowing withdrawals up to a predetermined credit limit.
- SMSF Loans: Self-Managed Super Fund (SMSF) loans for property investment within a superannuation fund.
- Construction Loans: Specifically for building or renovating properties.
- Commercial Property Loans: Customised financing specifically intended for business-related properties.
Investing in Property with the Help of a Broker
Investing in real estate can be a significant step towards growing long-term wealth. But to ensure you maximise your real estate investment returns, you need to start with the right finance. A mortgage broker can help you optimise your real estate investment by identifying which finance option is right for you.
At Sunshine Coast Financial Solutions, our brokers can walk you through the entire process of buying an investment property, ensuring you have everything you need to make an informed decision.
Ready to embark on your real estate investment journey? Book a free consultation with the experienced brokers at Sunshine Coast Financial Solutions today.
Meet Chris Wilson, the heart of Sunshine Coast Financial Solutions (SCFS). With over a decade of experience in finance, Chris started his journey as a broker with Aussie Home Loans in 2009. His dedication earned him the title of Rookie of the Year in 2010. By 2011, he was ready to build a business based on trust and strong partnerships.
