Category Archives: Buy Investment Property

Buy Investment Property

Why Buy Investment Property?

Before you buy investment property, you could ask yourself a few simple, yet powerful questions.

 

The content is general in nature and it’s important for investors which may be contemplating buying investment property to note further investigation is required in order to identify specific properties for investment potential…

According to Australian Bureau of Statistics (ABS), 97% of people aged 60 or more are in some way reliant on a government pension. In case you don’t know how much a pension is worth, imagine trying to survive on $15k pa (if single) or $24k pa (for a couple).

(a) Debt free family home still doesn’t produce income for utilities, food, transport, hobbies, and holidays

(b) Superannuation will be nowhere near enough to replace the income required to live life on your terms

(c) A “rule of thumb” formula for calculating the size which your investment portfolio (net of all liabilities) needs to be is to multiply the required income stream you want by 20.

For example: Required income (debt free) x 20 = Investment portfolio value (net of liabilities) $80,000 pa x 20 = $1,600,000

(Above figure excludes the value of your family home and does not factor inflation)…

buying investment property
Buying investment property with a focus on successful investment properties in highly sought-after locations

First question, “am I buying investment property or (PPR) principal place of residence? Next, “why would I buy investment property”? The answer to both questions is where to buy and what area(s) you know or feel comfortable?

Buying investment property or principal place of residence in context to if you are going to live there?

Generally speaking, any in market it is important to understand capital growth cycles, (structural change which is occurring) your target market (demographics, right style of property for right location) and population growth.

Key is understanding how the contract does not get in the way of closing deal because the contract must protect the interests of you as the developer and ensure settlement takes place smoothly. Of course, you want the maximum financial return, right?

Investment property has many different purposes, you are wanting to maximise your wealth via property investment so you need to factor your capital, borrowing capacity, lending institutions combined with macro and micro indicators.

Buying investment property involves due diligence with a clear strategy to focus on, which can give you real confidence you are investing based on correct research criterias and more than just a gut feel.

Buying investment property the infrastructure investment: The government and private enterprise spend billions of dollars each year on roads, transport, hospitals, mining, resources etc…

Look at what they are spending funds on and what impact the infrastructure has long term in those areas.

Buying investment property the populatIon growth: The Australian national population growth rate was 1.7% or 394,000 new residents in Dec 2012. Take note of where those people are moving too. Is it a capital cities, regional cities or regional areas? We also look at interstate migration, which is generally associated with employment opportunities or lifestyle choices.

Buying investment property the economy and employment factors: What is the diversity of industry? Consider what business/industry is in the area you are investing in.

Does area have a cross section of industries that can support current and future employment or is it reliant on one main industry?

Buying investment property the supply and demand relationships: Is there an oversupply or undersupply of residential housing? If there is an undersupply you are likely to see increased rental income and improved cash flow for an investor.

In this scenario you will also see a lowering of the vacancy rate. Undersupply could also put pressure on property prices. With an oversupply the opposite normally occurs for an investor. Rents decrease, vacancy rates increase and property price can decline.

Amenities: The better the amenities are the more attractive an area become for people wanting to rent. Look for good employment, schools, shopping centres, medical facilities, sporting facilities and café lifestyle.

Transport is a very important consideration: Look for a combination of good public transport and does it service the area well especially in the exact areas you are looking to invest in?

Buying investment property and rental yields: Rent yields are determined by the supply and demand of property. When investing it’s finding the balance between your rental income and cash flow.

If there is an oversupply of rental properties your rental income will reduce. This affects affordability and holding costs for investors.

Value: Look at the price of the property relative to similar properties in the same area. This will give you an idea of the real value of the property. Also consider the likely resale value by looking at the properties that are currently being sold in the area.

Design: Take a good look at the design of the house. Is it practical? Will people want to live in it? Does is have good natural light? What aspect does it face? What is the internal size of the property as this could affect future resale?

Projected Capital Growth: When you look at the macro and micro indicators to help you decide where to invest you give yourself a strong opportunity to see long-term growth with your property.

You can clearly see the crucial relationships of due diligence and number crunching in conjunction to all the above and using these macro and micro indicators which can really help you answer the big and important question, where do I buy?

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Buying Investment Property

Buy Investment Property | home buyer vs property investor

Buy Investment Property 

To buy investment property from a home buyer’s perspective, would you buy investment property before your first home? There’s a proven strategy to buy investment property, right? Are you a first home buyer?

If you buy investment property, would you consider giving up first home buyer’s grant and continue renting so you can start building a property investment portfolio first?

buy investment property
Buy Investment Property - Why consider using a buyers agent or buyers advocate?

If you buy investment property, it means you could quickly yield income in two ways through rents and capital gains. Are you considering buying investment property before making the emotional plunge into home ownership?

Most home buyers expect their first property investment will be their home, but are there good reasons to buy investment property? Why? Because there are pros and cons depending on your focus and circumstances.

There are two types or classes of investors, fundamental and professional. As a professional property investor, you’re consulting with advisors about your financial plan and investment strategy for maximising profits and tax deductions, right?

Professional property investor establish the team and only after consulation buy investment property making sure finance is pre-approved.

As a home buyer or property owner, you’re buying property before finding your team of advisors…does that make sense?

First step; build your team of trusted advisors because if you haven’t got a solicitor right now, you’re not ready to buy.

Does it make sense or do you think it’s logical to buy investment property in your own name and to buy without consulting financial advisors first:

  • Accountant
  • Solicitor
  • Financial planner

Next logical step is to make sure your team is experienced with proven results in the area you want to achieve. It’s important to understand once you’ve bought investment property, it’s expensive, difficult to change names and entities, right?

Why make property investments your long term plan?

If you choose to buy investment property short term, this means 5 to 7 years and long term is 10 years plus. So if you’re buying investment property and looking to sell in one to two years, the buying and selling costs would make it prohibitive.

Would you be better of looking at another investment source?

Perhaps risk minimisation and asset protection are far more important to you than wealth creation? If you’re not protected for personal injury, sickness or liability it disappear fast.

That’s why you’d be very smart in utilising income protection, landlord’s insurance, building insurance and ensure you get adequate cover which is all very important.

Location is the fastest and safest rule for where you buy investment property. The choice is for a thriving infrastructure. Do research using government websites and see where government is allocating funds for infrastructure.

Now, if it’s in a capital city make sure there’s already good infrastructure in place with established roads and good councils with established suburbs.

New suburbs generally take 10 to 15 years to level out so you want to take all this data into consideration for picking a town. It’s a good idea to stay away from areas linked directly to only one source of employment…

When is a good time to buy investment property? Firstly, it’s critical to do your research and know property cycles, so you need to consult your team of advisors in respect to different types of property investments.

The fact, the best time to buy investment property it really all depends on your own personal circumstances. What if right now is the best time to buy investment property?

Here’s a short property investments check list:

  • Are you developing a long-term financial plan
  • Are you between 20 and 60 years of age
  • Is your current income bracket more than $40,000
  • Do you have a strong income history with access to borrowed funds
  • Can you easily invest $50 to $150 per week
  • Are your personal finances organised in a structured way

If you answered “Yes” to most of the above, are you ready to go with new property investment opportunities? Next logical step is to make sure your legal structures are in place and how to best utilise the tax system for your wealth creation…

Only if you fully understand property investments as a long-term strategy can you appreciate and accept it as a non emotional decision…does that make sense?

Property Investments Now can help you to buy investment property with a goal of reducing your taxable income and increasing your income streams using cash flow property

Buy Investment Property

Buying Investment Property And The Property Cliches

Many Australians are buying investment property armed with nothing more than poorly understood property cliches, are these aphorisms always true?

Is property investing your business or passion? I personally love seeing property investors make bank. Seeing property investors make ill-informed property decisions and costly mistakes can be avoided with greater knowledge and understanding of property cliches.

Regardless of your property investing experience and the type of property you’re now researching or planning, here are some real estate and hard-won investing lessons I’d to share with you…

So what are property cliches? Are you aware of property cliches and why you’d want to ignore them in your property research, planning and transactions?

Over the years residential property has proven to be one of Australia’s best performing investments. Buying property is considered the biggest investment decision…a cliche?

Surprisingly, many Australians buy property with little or no investigation into the factors which drive individual property performance.

Misinformation is prolific and the cause of many poor investment decisions. Even well trusted beliefs can prove misleading for the most experienced property investors.

What if you questioned the validity of property clichés and commonly held assumptions? Would it mean as buyers you’d make better informed decisions? What are the investing factors which differentiate a good investment property from a poor one?

property cliches
Are you buying investment property armed with nothing more than poorly understood property cliches…

Location, location, location, possibly the most well-known property cliche, often quoted as the quintessential factor when it comes to property selection.

What many buyers fail to realise is location is about far more than just the right suburb or even the right street; it is as specific as the lot number or position in a block of units.

Neighbouring properties may appear to be similar in many ways, factors such as aspect, orientation, floor plan, levels of natural light and security, all have an important impact on property value beyond the underlying land value.

Hot spots, it’s not uncommon for property investors and buyers to chase the next big hot spot with hopes of making a quick buck. Hot spots aren’t all they’re cracked up to be right?

By definition a hot spot is a suburb or area predicted to benefit from rapid short-term gains in value. However, despite an initial spike, a hot spot is usually characterised by slow or limited growth in the long-term that often eventually undermines short-term gain.

Because of the high transactional costs of buying property investments,  real estate should be viewed as a long-term plan, which means hot spots often fail to provide the exceptional growth buyers hope for…

Timing and analysis of historical sales data clearly shows that it isn’t when you’re buying investment property, so what you buy is that an important factor?

Purchasing a property based on price alone is no guarantee of future capital growth or performance. Selecting the right property with the right profile for growth ensures property owners buy an asset which performs irrespective of wider market conditions.

Keeping up with the Jones, some of the best performing properties aren’t glamorous. When buying investment property don’t be fooled into thinking the more you spend the greater the likelihood of good capital growth.

In fact, buying a flashy new property or one considerably above a suburb’s median price can limit buyer demand and subsequently growth.

When investing, don’t buy property which appeals to buyers’ aspirations. Buy property which caters to financial and social requirements of tenants and buyers in the area.

Sitting on the sidelines, during uncertain economic times it’s common for buyers to withdraw from the marketplace in anticipation of property prices reaching the bottom.

Adopting a wait and see attitude to buying and selling real estate can be disadvantageous.

The reduced competition during a downturn can create really good opportunities for savvy property investment buyers. History shows most buyers tend to return to the market after a positive shift in sentiment and later on as the values have already occurred.

Property investors which have bought well needn’t worry about selling in a downturn either as quality real estate assets are always in high demand.

So don’t wait for others to make the first move. Base your decision to buy on your personal financial circumstances, not market sentiment.

Buy the worst house on the best street, can seem like a cost effective way of buying investment property in a sought after location, however, it is not without risk…

property renovation cliche
Property renovation cliche…

The goal is commonly to transform property from worst to one of the best properties on the street. However, any saving on initial purchase is often very quickly absorbed by renovations to improve the property.

Conversely, deciding to leave the property in its original purchase conditions can have negative implications for the property, which will be reflected in future capital growth.

It may actually be more cost-effective to buy a better property and forgo the expense, stress and risk of renovating.

Think outside the box, when it comes to investing in property there is no need to reinvent the wheel.

Investment properties which offer ROI aren’t always architecturally unique or modern. In fact, they are more commonly well-located inner city period and pre-1970s properties.

Property selection isn’t a guessing game, so stick with tried and tested property selection methodologies that rely on empirical sales evidence, not speculated or high-risk returns.

A renovators dream, as renovation property programs continue to hit Australian television screens the punter or DIY handyman considers the prospect of buying and renovating to make a quick buck.

The novice renovators often underestimates the commitment required to transform a property, which can cost them significantly.

value investing
Novice renovators surprised by value investing…

When deciding to renovate it is important to consider where the property is located, the type of property e.g house or apartment, whether it will be a rented investment property or owner-occupied…

Who is the target market, potential buyer or tenant of the property? Sellers should renovate to their target market…

It is also important to be wary of overcapitalising in a property, as the amount spent on renovations may not offer an equivalent return in the increased value of the property.

A good rule of thumb is to not spend more than 20 per cent of the property’s value on renovations.

Up and coming, closely related to hot spots concept, which is often used for suburbs expected to perform well on the basis of proposed future improvements to infrastructure and/or local amenities such as roads, school, shopping complexes, sporting facilities etc.

When it comes to property, one of the golden rules is never speculate. Purchasing on the basis of planned or proposed future improvements is risky.

Hundreds, if not more, development proposals are put on hold or denied every year and when approved can take many years to build. There’s no guarantee the added amenity will add positive weight to local property prices.

The most diligent measurement for an asset’s future growth is to look at its performance history. Remember to consider this when looking at hot spot or up and coming suburb.

If you feel that you are ready to step up to the next level, stop trying to figure it all out on your own and make sure you don’t go around the calender another year without seeing success...click here now!

We might be able to help by mentoring you and giving you a step-by-step system to follow and help you get to the next level.

Property Cliches