Investing in property has become something of a national past time in Australia, with most Australians either already owning real estate, or looking to delve into the market.
While many people have good intentions, however, only a small percentage of them actually follow through by taken action on their property investing goals.
If you’re keen to get started and you’re wondering what makes a good Property Investment in Australia, these property investment tips will help give beginners a broad overview of what you need to do in order to set yourself up for success.
Ultimately, property investing isn’t rocket science: anyone can be successful in real estate regardless of your education, background and financial position. There are also no magic formulas or secret shortcuts that will allow you to create wealth fast.
Advantages of Investing in Property in Australia
- Plan, Prepare and Research
Your success in real estate often comes down to your attention to detail when property investment planning. If you try to take shortcuts, skip over research or follow the advice of someone else without qualifying that information for yourself, you run the risk of making a costly mistake.
- Always Keep Your Finances in Check
Before you even consider investing in property, you need to get a handle on your personal budget. List all of your assets, income and expenses and then sit down with an experienced mortgage broker, so you can get an understanding of how much you can afford to borrow to invest.
- Budgeting is a Must
Sticking to a budget will help you understand where and how you spend your money so it’s a great idea to start budgeting even before you start looking for a property. I’m not saying you need to live off two-minute noodles so you can scrimp and save every last penny – however, most people will find that they can trim their spending and increase their savings habit, with a little effort.
- Set Your Goals
It’s crucial that you have a clear idea on what your goals are and why you are property investment planning in the first place. Deciding on a deadline as to when you want to achieve your goals will also help you work towards achieving your goals with purpose and clarity.
- Assess Your Risk Profile
Everyone has a different risk profile and your own personal attitude toward risk will impact your real estate and wealth creation journey. It’s important that you formulate an investment plan that suits your risk profile, as this will help you cope with pressures of investing in real estate without losing sleep at night.
- Be Prepared to Pay Tax Upfront
Of all the property investment tips I wish I’d known sooner, this is the most important one! On most property purchases in Australia, you will have to pay 2-3% of the purchase amount upfront,for a tax known as stamp duty. I wasn’t aware of this, and had to find $12,000 at the last minute on my first property investment. The amount you will pay depends on which state you buy in.
- Be Prepared to Pay Tax As You Go
The state government also imposes an annual land tax, once your property holdings become more substantial. These charges vary with states and territories, so make sure you check out the tax details associated with the purchase beforehand.
- Look for The Prime Locations
Most of the properties that have high value in terms of investment are located in large cities of Australia, particularly in cities such as Perth, Sydney, Brisbane and Melbourne. The best location for an apartment would be the suburbs while best stand-alone homes are found a bit farther out. You might want to invest in properties located in areas from where amenities like schools, public transport, parks, etc. are easily accessible. Such properties have larger market value.
- Property Investment Seminars
Education is key to your success as a property investor, so it would be useful to attend some property investment seminars and courses to gain an understanding of the basics of property investing. Note that not all seminars are created equal, however: do your research and only sign up for educational courses and programs with repeatable, independent organisations that are in the business of helping you succeed as a property investor, rather than simply selling you real estate.
Why Invest in Property?
Above, we’ve listed just a few of the property investment tips you need to know as you get started on your real estate journey. There are dozens of advantages of investing in property but it’s important to note that there are also plenty of risks and pitfalls you need to be aware of.
Far too often, Australians decide to take the plunge and invest in property without gaining an understanding of the ‘bigger picture’ – both in terms of their own goals and in terms of the broader property investing principles that will guide their asset’s growth.
For every successful property investor in Australia, there are landlords who are struggling to make ends meet as they’ve over-extended themselves financially. Or, they have bought the wrong types of investment properties and they aren’t enjoying the capital growth or profits they expected to achieve.
These are everyday Australians just like you, who understand the advantages of investing in property, but who perhaps don’t quite have an understanding of what makes a good investment property.
The one key factor that can make all the difference here between those who succeed and those who fail when investing in property is simple: education.
Without a strong financial and real estate education, it’s impossible to learn the best strategies for growing your wealth. Those who seek out learning and expert guidance on how to invest in property can learn how to do so safely, smartly and with minimum risk.
It goes without saying that for beginners to the world of real estate, it is highly recommended that you don’t attempt to do it on your own. If you consult with an experienced expert, you can get practical, personalized advice and guidance on how to invest in property and what makes a good investment property, considering your own personal goals and objectives.
There’s a reason why most Australian investors never make it past one investment property: this is because it’s so easy to make costly mistakes. Why run the risk of making financial and investing decisions that could cost you a fortune and take you further away from your goals, when you can work with a professional and get access to their proven guides to investing in property?
5 Bonus Australian Property Investment Tips:
What makes a good investment property anyway? Before deciding to become a landlord and buying an investment property property, you should have a clear idea on what makes a good investment property.
These 5 bonus tips will help you ascertain the proven ‘best performer’ properties over the potential duds that will drag your finances down:
- Focus on Finding a Central, Popular Location
A well-performing investment property will always be located in a prime neighborhood. You can always chance the property, but you can’t chance where it’s situated, so this is key to your success. Avoid locations that are dependent on a single industry as this is a fairly risky scenario; if the industry fails, everything related to it topples.
- Consider Your Investment Strategy: Active or Passive?
Before buying any property, consider how much time, effort and money you want to invest in the asset on an ongoing basis. Property isn’t a ‘set and forget’ proposition: you will always need to be actively involved in managing your property to a certain degree, even if you appoint a property manager. However, a low-maintenance apartment with an on-site manager is going to demand far less of your personal time and attention than a large, rambling house that requires ongoing upkeep. Consider this when you begin property investment planning.
- Buy in a Desirable Neighborhood
As discussed in our first point,location is key: you want to buy property that offers easy access to amenities like public transport, schools, recreational areas, shops and restaurants, public facilities, beaches and parks, etc. Also look into statistics such as crime rates of an area, as this can influence the demographic of the area.
- Look for a Strong Rental Market
This boils down to the natural influences of supply and demand. Ideally, you want to invest in a suburb where the level of rental listings and vacancies are low, and demand for rental homes in the area is high. If the vacancy rate is high – generally, a rate above 3-3.5% is considered to be weak – this may impact your ability to find a tenant, forcing you to lower your asking rent.Look for properties in areas where there are at least 30% of local residents being renters, to ensure a steady stream of potential renters.
- Seek the Ability to Add Value
One of the advantages of investing in property is that you can use dozens of strategies to get ahead. Many investors manufacture price growth through renovating, which can help to improve the property’s intrinsic value and increase your rental return. A simple cosmetic renovation can do wonders to the value of an established property, while homes purchased on large blocks of land represent the opportunity to eventually develop.
This article by no means covers everything you need to know when learning how to invest in property, but it gives you a good starting point to begin planning where to go from here.
The way I see it, investing in Australian property is essentially a business decision. The whole reason we invest is to make a profit and so you should never let your emotions get in the way; they can lead you to make the wrong decision, which could cost you dearly.
Stay focused on your goals and don’t take shortcuts with your research, and you’ll be well positioned to make smart property investing decisions that move you forward financially. Do extensive due diligence, commit to robust property investment planning and you’ll make smart decisions that will help you to generate strong returns from your property investments for years to come.