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Property investment has long been a ‘go to’ strategy for Australian investors. Understandably, like all unchartered waters, it can prove a little bit daunting for first timers.
To help make things easier, we are here to answer some common questions that surround this type of investment strategy.
“Where do I start?”
It’s okay - you’re not alone. Many are confused about where to start when investing in property.
Firstly, it’s important to do your home work. Know the neighbourhood you would like to invest in. Chat to the locals, meet with real estate agents, research historical property values in the area. Do everything you can to ensure you are making a wise and a calculated decision.
Next, you need to start thinking with your head – not with your heart. Letting small irrelevant factors (like curtains or paint colour) cloud your judgement means you’re probably not going to make the best investment choice. Here are some more important things to consider: will this location attract good tenants? Will it provide gains and returns? Will it appeal to a broad market when you sell in the future? This kind of analytical thinking will help you make better investment decisions.
“What can I gain from investing in property?”
One of the main reasons Australian investors look to the property market is because of the potential for capital growth. This is when your property becomes more valuable over time, earning you a profit when you eventually sell.
Another way to gain from property investment is through positive gearing. This is when ‘money in > money out’ i.e. the rent you receive is more than your loan repayments and property maintenance. This can be a helpful strategy, as you receive fast money that can compliment your regular income.
“Is investing in property safe?”
Investing in property is a lot safer than other investment options. Stocks are volatile, and can rise and fall at a rapid pace. Even though house prices can also fluctuate, the demand for housing (which is fuelled by a rising population) means that the property market is sustained in the long term.
With property investment, you have a large degree of control. If house prices drop, but you still have a healthy cash flow coming in from your tenants, then you can generally ride the wave until house prices go back up again.
“What if I can’t find any tenants?”
This is a justified concern, and something you should prepare for. There may be periods when your property in untenanted, and you still have mortgage repayments to cover. A good way to pre-empt this is by paying slightly above your minimum repayments every week, as this will give you a handy buffer in emergency situations.
Landlord insurance is also extremely important to consider. You should find a policy that covers you if your tenant defaults on their payments, or else you will be left to come up with the money for repayments yourself –with very limited notice. Landlord insurance should also cover you for any damage to the property, and any of your contents within its walls.
Disclaimer: The advice provided in this article is general advice only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this advice you should consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs. We encourage you to consult a finance professional before acting on any advice provided in this article or on this website.