Investing in Property

An investment property in Australia offers consistent financial security like no other asset class.

Over the last 25 years, the property market in Australia has grown consistently at an average rate of 6.8% year upon year. This is incredible for a number of reasons. It means that regardless of the economic circumstances, the boom and bust cycles, the Australian property market has experienced consistent growth over a 25 year period.

Phenomenal growth over the last 25 years

Continue reading to learn how to use this knowledge in your property investing strategies

[evidence] The Australian Property Market doubles itself every 7-10 years

The most simple deduction you can make from this 25 year track record is this:

The property market in Australia doubles itself every 7-10 years without any intervention from your side. The market does all the heavy lifting for you – it happens on its own as part of the natural economic cycle within the Australian Property Market.

The key driver behind this phenomenal growth has been Australia’s monetary policies and supporting stimulus packages that have made it easier for people to buy investment properties in Australia.

Australian home owners have been able to enjoy low interest rates due to several rate cuts from the Reserve Bank. This is a great opportunity for property investors to get into the market.

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Think Before you Leap

Property investing is not easy. In fact, if you ask around, you’ll find more people that have lost money investing in property than those that have become millionaires through smart property investments. Don’t be discouraged though.

Successful property investing isn’t some kind of rocket science or riddled with secrets that you can’t easily decipher. If you take the time and make the effort to learn how to invest in the property market then you too can achieve success as a property investor in Australia.

If you’re considering buying your first home then you still should make the effort to understand the property market so that you make a well informed decision about when to buy, where to buy and how to buy your first home so that it becomes a real appreciating asset as opposed to a liability for you in future.

Understanding the Real Estate Investing Market in Australia

Real Estate investing requires an understanding of the market conditions for the specific city or suburb you wish to invest in. Unfortunately, there’s a lot of noise in the market about Real Estate and it is not easy to get a clear view of which way the market is heading.

Some say its going up while others debate that its heading for a crash. Knowing how to separate the facts from all the noise, is an important aspect of being successful as a real estate investor in Australia.

Smart property investors across Australia rely on fact-based, objective market data to research an area and make informed decisions about property investing.

For instance, a suburb showing significant capital growth in the last 12 months is no longer the right candidate for buying a rental investment property. It is so because if the suburb has already experienced phenomenal growth, chances are that you’ve already missed the boat. If you decide to buy in that suburb now, you will most likely end up paying too much for something that is clearly over-priced due to the “fear of missing out (FOMO)” effect.

Sophisticated real estate investors look for specific housing market data to identify suburbs that are on the verge of experiencing massive growth so you get in at the bottom of the cycle – just when its about to head north.

Buying Vs. Renting

Sometimes it is better for you to rent instead of trying to bust your back buying a property in a suburb that is clearly overpriced. A consistent skill successful Real Estate Investors have is an objective approach to property investing. They never get emotional about property investing and always follow their exit strategy – which is largely driven by numbers not emotions.

Across Australia, there’s a real lack of visibility into housing market data, which is why Property Magnets introduced its own housing market data analysis tool. This tool makes it easier for real estate investors to understand market data and make better property investing decisions.

Many ways to Invest in Property

There are a number of different ways you can go about investing in property. As with anything, the very first step is for you to define your goals. What are you trying to achieve?

Answering these questions upfront gives you a good opportunity to take stock of your own goals and aspirations as a property investor.

Important Things To Know about Property Investing in Australia

If you are new to investing in property and want to learn how to become a real estate investor then some of the following things are worth keeping in mind.

If you are interested in buying your first home:
  1. Make sure you understand how to read the market properly. It is easy to get emotionally involved in the process of buying a house that you can sometimes overlook the specific attributes a property must have in order for it to become a good asset for your future.
  2. Be mindful of your repayment obligations on the mortgage against the property. While interest rates are low currently, they won’t remain low forever. You need to factor in what the interest repayments might look like over the next 2-5 years to properly plan your finances. Remember, a 1% increase in interest rates (not uncommon) can result in $10,000 in additional interest payments on a million dollar property.
  3. Consider the growth potential of the suburb as well as the property you have in mind. What’s the land to dwelling ratio? How much vacant land does the property come with? Is there any future subdivision potential? All these are important things to consider. Remember, its the land component of a property that goes up in value, not the dwelling itself. That only depreciates.
  4. Explore all the government programs that are out there to assist first home buyers. All states in Australia offer some form of “First Home Buyer” grant as well as subsidies and tax breaks for buying newly built properties. Talk to an experienced property coach or mentor to understand how these work.
If you’re buying an investment property:
  1. Besides doing the basic homework about market conditions, you must also be very clear as to the end purpose for why you want to own an investment property in Australia. Is it for creating a cash flow rental income? Is it for future capital gains? Or is it a combination of both.
  2. Your future exit strategy will determine how you plan your entry into the housing market. There’s a lot of misinformation in the market about buying investment properties. Sometimes, being new to this works in your favour because you’re not overwhelmed with conflicting information. Learn what makes a real estate investment successful before diving into the process.
  3. Understand the entire deal flow, from end to end. Learn about the various moving parts in a deal. Taxation, ownership structures, legals, finance and asset management, to mention a few, are essential bits in a property transaction.
  4. Invest in property education to gain insights into how to strategically plan your real estate investment activity and achieve maximum results.
  5. Learn about the various funding options available to you for buying your first investment property. There is more than one way to do it and in some cases, you can even get into property without using your own cash.
  6. Be careful who you listen to. Not everyone in your circle of friends, co-workers or relatives will have the right advice. Do your research but be open to speaking to an experienced property coach or mentor to help you overcome some of the initial hurdles.
  7. Consider “done-for-you” property investing options. If you are a high income earner and don’t have the time to learn and invest yourself, look at options where experienced agents or advisors can do it for you.

 

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