How to start your property investment journey.

The Beginner’s Guide To First-Time Property Investing In Australia.

Why Should You Invest In Property?

Why do so many Australians invest in property over any other investment stream? It’s a very popular asset choice amongst investors as a long term wealth creation plan for good reason, let’s explore why.

Long Term Investment Opportunities.

Like any market there are the peaks and troughs, however over time property has always proven stable with home prices steadily growing in value through each decade. Adopting a long term strategy, strong investment grade properties should accumulate capital growth over time and it’s this reason it becomes a popular option as it lays the foundation for an eventual, generational nest egg.

Leverage your leverage.

Because it’s quite literally ‘bricks and mortar’, lenders tend to be more favourable with property due to its fixed and tangible nature. Lenders are more likely to lend a higher proportion of the value of a property to borrowers meaning as an investor you don’t have to pay the ‘whole cost’ of the investment upfront. Tax deductions and being about to make rental revenue also help cover costs of this style of investment.

A stable asset.

Compared to other investment streams, property investment, even considering fluctuations tends to remain more stable in pricing compared to shares which can operate in a more volatile environment.

Income generator.

Property offers investors an income stream too in the form of rent. This can help offset the costs of investing including loan repayments and other property related expenses.

Increase the value of your original investment.

There are ways to fast track a property’s growth and income producing potential through ‘value add’ opportunities. Ranging from minor cosmetic changes like a paint job to more aggressive equity building strategies like renovations, subdivisions and development. As an investor this gives you greater control over your asset and the returns generated.

A secure investment.

People always need a place to live. Property ownership is only made up of 30% investors, so even if an investor was to leave the property market property prices wouldn’t completely collapse. This is a contributing factor as to why property generally remains resilient through economic and global challenges as properties retain their value in part because ownership majority is owner-occupied.

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How is property investment profitable?

How is property investment profitable?

There are three clear avenue streams when it comes down to how to make money from property investing.

  • Capital Growth: Investors can see their property value increase over time.

  • Cash Flow: Most properties will start off negatively geared in the early stages (this initial purchase is an investment towards compounding capital growth) but can become income-positive over time. The best strategy is to buy for growth and look for opportunities to improve net cash flow over time.

  • Manufactured Equity: investors can influence the value of their asset and build equity quicker via renovations, subdivisions and development potential. Investors can look to value add and manufacture equity in the short term.

Property Investment is most beneficial as a long term investment.

While there are occasions when selling in the short-term may prove beneficial the majority of investors are best served by holding their investment for the long term. Adopting this strategy is to gain the compounding capital growth that occurs when you hold property. Whilst compounding is commonly associated with interest, it’s also an incredibly powerful concept when applied to the capital growth of a property.

The quality of the property you purchase and the location in which you buy are the strongest determinants of performance too, far outweighing any benefits of timing the market. Selecting a property that outperforms average growth rates, even by 1 or 2%, can set you ahead considerably in the longer-term.

What is flipping and should I do it?

Many first time investors are lured by the promise of a ‘flipped’ home being a quick and profitable investment.

While this strategy can result positively if executed correctly, it doesn’t always and its not a strategy that works or is suited for every investor. It involves timing the market and managing the renovation process and requires purchasing the right property and ensuring your costs stack up against potential sell price.

Do your research.

Successful property investing comes down to buying assets that will perform over time.

You want to meet the fundamental growth factors of supply, demand and land value when you are researching and subsequently purchasing a property for investment.

Don’t limit your opportunities!
A common mistake is to only look in areas you live or are familiar with. Look at areas with strong demand for properties, wage and population growth of an area, and the economy. Local amenity, distance to the CBD, public transport connectivity and local planning policies should also be considered,

It is important to understand the demand for certain property features within the suburb you have chosen, as what appeals to you may not appeal to prospective tenants and future buyers. Property investing is about your potential tenant, not where and how you live.

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