Just because you’ve taken the leap from homeowner to property investor doesn’t mean your financial fortune is assured.
There is no short road to success!
Have you heard of the acronym SMART (Specific, Measurable, Achievable, Realistic, and Timely)
– think specific strategy
– measure your risk
– is this achievable?
– realistic performance
– is the timeing right?
Despite our booming property markets, it doesn’t even mean that you will start making a profit in the short term, or that you are on your way to owning a sizeable portfolio. The reality is around 20 per cent of those who get involved in property investment sell up within the first year or so and close to half sell their property within five years. Of those investors who stay in property, around 90 per cent never get past their second property.
So how do you ensure that you avoid all the mistakes that those before you have made, and become one of the few property investors who goes the distance and grows a portfolio that generates real wealth? There is no short road to success, but the property road is well worth the it, if you stick around long enough to get to the good stuff.
Australia’s property market is going through an unprecedented period of growth that even the coronavirus pandemic can’t dampen. Lockdowns across the country are becoming hardeer as the latest COVID-19 strain takes hold, pushing the proeprty market even higher andhouse prices are rising evn faster than ever before.
So we ask ourselves why are prices rising so fast?
Because there is a ‘perfect storm’ for house prices: low-interest rates, low housing supply versus strong demand, a flight to quality by investors and various government stimuli. This combination is frustrating prospective first-home buyers who are being blocked out of the market as rising prices make buying property out of reach for many. At the same time, the confusion caused by the lockdowns and the lack of supply is putting off many would-be sellers from putting their property up for sale.
BUT the rules of investing do not change! no matter what point of the property cycle we are in. If you re an investor wanting to get into the market or add to your current portfolio dont change the rules;
– Capital grownth shoud be the long term aim
– Location, Location, Location
– Understand the demographic – rent affordability is linked to wages
– Have your finances as well as a buffer in place
– Listen to the professionals – dont let friends and family sway you for the wrong reason
People will always need somewhere to live, and homes are the true “safe haven” in the current environment.
Investing in regional vs metro areas
The decision to invest in property should never be just a stab in the dark.
Investing in property involves many choices and considerations, for example, you can choose between a house or unit, off the plan or a character classic. However, perhaps deciding on the location and weighing up between metro or regional location is one of the most important decisions you could make when buying an investment property.
Metro investment
Properties close to the CBD generally have strong capital growth. This is because values tend to rise as population and demand grows. Metro areas also tend to experience lower rental yields than regional areas due to the high management and maintenance costs. However, in some cases, the upside to metro property investment, is the potential for high capital growth.
Things to consider when investing in metro areas include what sort of properties are popular, access to public transport, rental demand and which suburbs are the place to be. Speak to property managers and buyer’s agents to find out what’s hot and future predictions.
Metro areas often give you choice between existing dwellings and off-the plan properties. If you’re considering a new build, be sure to research the developer and builder.
Regional investment
If you are considering investing in regional centres, it’s worth noting that most of the time, it’s a long-term investment decision.
There are benefits to investing regionally, including higher rental yields and the opportunity to eventually retire in your investment property. However, the risks can be greater when investing in regional areas. That’s why it’s important to do your research.
Consider the recent auction clearance rates, rental yields, and vacancy rates. These numbers will help you get an idea of supply versus demand in the regional area you’re considering. A high rental yield could potentially close the gap between your outgoings such as your mortgage or ongoing costs, and your investment income.
Look for areas with infrastructure such as universities and new amenities. These areas generally have healthy employment and strong rental demand.
Consider using a buyer’s agent who knows the local area and can inspect properties for you if you don’t live nearby. Also find a good local property manager who can help you find the right tenants.
Choosing an investment property can be different from finding a home of your own. Your affinity with the area doesn’t need to be the basis of your decision.
You can often take a more pragmatic approach with an investment property. You want the location and the property to appeal to the rental market. Your investment strategy will play a part in your decision between metro and regional areas.