Property investment is not for the faint-hearted, it is a big decision, and like all investment that involves significant amounts of capital outlay or borrowing; it is not without risk. However, it is also one of the most solid and proven ways of growing your wealth, and generally involves less risk than the stock market and other capital ventures that can deliver strong returns in short periods of time.
Knowledge is the key; knowledge is power – you need to be able to identify what makes a good property investment and remove any emotion from the decision-making process. Regardless of the well-meaning advice from family and friends, you must carry out extensive due diligence to ensure your venture into the world of property investing is a positive and a profitable one.
The four key factors to consider are:
- Capital Growth – your investment must have a proven history of above average appreciation due to the location and demand.
- Cash Flow – you have to manage this correctly with every investment, including getting the right tenants and rental income as well as creating a cashflow buffer and avoiding over-capitalising on a property you cannot afford.
- Tax benefits – while you should never invest solely for this reason, a good tax strategy can help you manage cashflow, decrease your tax obligations and increase your bottom line.
It is also critical to be aware of the property cycles; when the market slows, this is generally when you can secure the best deal, with less competition from other buyers, the price is driven down. During this COVID-19 crisis, the market has slowed somewhat, particularly in the capital cities, and prices have fallen; keep a very close eye on this unfolding situation, as it could prove a very savvy time to purchase an investment property.
Let’s talk a bit more about: Location.
You are all familiar with the real estate mantra ‘location, location, location’. Location is a key factor that can make or break a property investment.
Question: How do you get it right? Answer: Research coupled with Professional Advice.
You need to find out about the historical movements of the local market, the primary demographic who lives there and ask yourself, is there more demand from homebuyers than there are properties for sale?
Find out what future infrastructure/capital works are forecast for the area of interest – major public and private investment can make a significant difference to the outlook of an area; a depressed area can be rejuvenated with an injection of funds and its popularity can surge as a result.
When demand outweighs supply, you have the prospect of good long-term growth, so if you buy in well-established, inner city areas where there’s very little capacity to create any new land and housing, you’re on to a potential winner.
Professional Advice – We Can Help
Developing a team of trusted experts, who knows the area you are considering thoroughly, is not only a great way of saving time, but also a critical source of information and expertise that you cannot build up overnight. Tap into this.
Without a well-rounded understanding of how to maximise your borrowing power, use equity as a leverage to build your portfolio and maintain a financial buffer to see you through the difficult times that we all ultimately face, you are setting yourself up to fail financially.
Invest Approved is a highly specialised investor solution offering a comprehensive investor support system which has assisted thousands of investors Australia-wide to navigate the property market safely and effectively. Created by some of Australia’s most successful property investors, we are here to protect and assist follow property investors – helping you to make the right choices, saving you a lot of time and angst in the process.
The Investor Toolbox is an invaluable resource for all property investors wanting to stay up to date on changes in across to residential property investment sector. Access now