Investing in Property – Things You Need to Know
Ascertaining Your Position
A property purchase is possibly one of the biggest decisions people make in their lives. For some, it is purely a vehicle for making money. For others, it is also an interest, a hobby or a full time occupation. The purchasing of property to create a full portfolio can be a time consuming job. Whatever the scenario, the purchase of an investment property needs to be considered carefully.
In researching the investment property, many factors are to be considered- financial capacity, location, type of dwelling, capital growth and rental yield.
An investment property purchase should primarily be a financial decision, one which is aimed at producing long term wealth for the owner.
For this reason, it is wise for potential investors to seek the independent advice of a financial planner to ascertain their position in affording an investment. At no time should the purchaser be put in financial difficulty or under any financial strain.
Once it is established that a property investment is a wise choice, a good financial broker can access multiple financial institutions for obtaining a loan best suited to the investor’s financial needs.
Then it is “Let’s go shopping”.
Head vs Heart
To survive the ups and downs of owning an investment property, and unfortunately there will likely be some challenges, it is wise to like your property choice. This does not mean it has to be an emotional choice to the point of designing the kitchen and landscaping the garden as this can create TOO much of an attachment. You simply need to be approving enough of the dwelling to overcome any challenges presented. It is after all, basically a financial decision and asset. By comparison, buying shares for financial investment does not lend itself to emotional attachment and nor should property investment.
Location, Location, Location
The property market is ever changing and evolving. Where the best location is to buy today may not necessarily be so tomorrow. Varying factors can affect the enticement of locations – infrastructure, development, dwelling types, surrounding suburbs, growth potential, resources and trade, as well as Government incentives, are just a few of them. Below are some examples of how these can affect a location.
- Government Incentives
Sometimes government processes intervene to change the course of the property market. The National Rental Affordability Scheme (NRAS) was an excellent scheme when it was being rolled out. However, there are few properties available now with NRAS approvals and these are only for sale in prescribed areas. They are not open to choice of location or type of dwelling, yet the enticement to forgo these choices may be overshadowed by the Government tax incentive for some.
- Dwelling Types
A lot of advice is given as to the areas one should purchase in and the type of dwelling. The best rule of thumb is to look at the demographics of an area and match it with a dwelling type. For example, Bowen Hills, an inner city suburb of Brisbane, is a perfect match for 2 bedroom, 2 bathroom apartment. It’s close to the hospital (as well as offices) so there is a demand for accommodation that suits shift workers as well as the need for low maintenance properties as tenants are busy and don’t have time to look after backyards etc. Whereas in suburbs like Point Cook, a 1 hour drive out of Melbourne, house and land packages are the suggested purchase. Being a suburb with facilities to suit growing families, the dwelling type needs to match so a 3 or 4 bedroom house is optimal.
- Area Income/Economy
The provision of multiple sources of income should also be taken into consideration. Toowoomba for example, is a thriving inland regional centre for agriculture as well as a base for the mining and its related industries. On the other side of the coin, coastal ports depend upon export/import industries as well as nearby agriculture and local tourism so they have a multiple sources of income in the area to fuel the local economy.
- Surrounding Suburbs
When looking at real estate, you will generally find some areas to be heavily marketed and pushed very hard. These can sometimes already have reached, or are close to reaching, their greatest investment potential. They will have had an influx of housing built and sold, transport lines put in place, new community facilities built etc… so there isn’t much left to be added to the area to give it another boost in growth, asides from the general expected growth most properties achieve over time. Thus, surrounding suburbs can make for a lucrative purchase as they will benefit from all the funds poured into that suburb, without the price tag on the house just yet. Dakabin on Brisbane’s northside is an example of this. In late 2014, a link road went in connecting Dakabin to North Lakes. North Lakes has had billions of dollars spent to make it become its own self sufficient community. Housing is at a premium so anything available is much pricier than its ‘over the highway’ neighbour, Dakabin. Yet Dakabin benefits from all the facilities, without the house price tag.
The Law Says…
One factor to take into consideration when weighing up your purchase in different states, is the law. Contracts and legal documents will vary from state to state so it is suggested that a conveyancer located in the same state as the property purchase is used as they will have the best knowledge on the state compliances. Likewise, some financial aspects such as Stamp Duty will vary from state to state. A good financier will be able to assist in weighing up options with Stamp Duty and property costs should you have a few properties to consider.
It’s important to remember that as an investor/landlord too, there will be a difference in Tenancy Legislation between states. Generally speaking, the Tenancy Acts aren’t too different from each other – it is mostly notification periods and the like which can differ. So for example, should one have a property already in Sydney, and then be looking at purchasing one in Melbourne to diversify your portfolio, having a quick look over the Tenancy Act for that state would be recommended.
To view some of the amazing properties available across Australia, please visit the property listing hub.
Alternatively, to discuss the currently “hot suburbs” suitable for your investment aims, contact Tandem54 Properties on 07 3861 9853.