Buying an investment property continues to be one of Australia’s favourite ways to invest. An investment property should be about increasing your wealth and securing your financial future. There is however, a common misconception that property investing always delivers positive returns, while this is true most of the time it certainly isn’t an instant road to riches. Watch our two part video cash out refinance investment property tax deductible to see our top 10 tips for buying an investment property or view an infographic summary of our top 10 tips here.
Choosing the right property at the right price Investing in real estate is usually all about capital growth, so choosing a property that is more likely to increase in value is the most important decision you will make, so buying at the right price is absolutely critical. Unlike buying shares where the value of a company is transparent, real estate is more difficult to price, this however provides you with the opportunity to acquire an asset below its real market value if you are patient and knowledgeable. You probably aren’t aware but lenders and mortgage insurers have valuable data on different locations and property developments and you should try and access this information to assist you to avoid picking the wrong investment property. Ensuring that you have a steady rental income stream is also vital because this cash flow will make the holding of the asset more affordable and provide income.
For example, vacant land will provide no rental income but may appreciate more quickly if purchased in an area with limited supply. Investing in a home unit might mean less maintenance costs than investing in a freestanding weatherboard house. It is also important that your property suits the demographics of renters in the area. For example, if it is near a university more bedrooms will be in greater demand than a big backyard for kids to run around. A family home that is close to schools and parks on a quiet street will be more desirable than a property on a busy road. Investing in property is a proven path to long-term wealth, however you should consider it a medium to longer term type of investment, so you’ll want to make sure that you can afford to maintain your mortgage repayments over the long term. Here is an example of what it might cost you to own an investment property.