The summer charter season is well under way, charter tips are starting to pile up in your back pocket and you’re thinking about what gadgets or clothes you want to buy with the cash this year.
One option is investing your hard earned cash in property.
Well located investment property is one of the best investments for everyday investors. Combining solid capital growth, regular income and generous tax breaks, it’s a simple investment that most people can understand. With a little research, effort and perseverance, it’s possible to turn a small deposit into a sizeable amount for the future.
The first investment purchase is always the hardest. It’s a big commitment to lay all your money on the line, but in the end it’s this first step that starts you along the road to future wealth. With one property purchase behind you, the process becomes much easier the second and third time.
So move over, Trump, yachties are on their way to becoming property moguls!
But before you can kick Trump to the curb, how exactly do you find a great property investment?
We’ve all heard the saying “location, location, location.” This is especially true for investment property. There is a direct relationship between location and demand; since demand is the biggest driver of capital growth, you have to buy the best property in the best location you can afford. People will always prefer to live 15 minutes from the central business district (CBD) rather than two hours away, and most prefer to have the beach at their front door rather than 10 blocks away.
Location is a crucial factor because it’s the one thing you can’t change once you’ve bought the property. Scarcity is what makes a good location great. Get the location right and you’re well on your way to choosing a great investment property.
2. Key factors to assess when predicting a growth suburb:
Scarcity: Are there many other properties competing for your rental dollar?
Inner city renewal: Will services be maintained or increased in the area?
Location: What services and activities are available today? How easy it is to live there? How expensive?
Planned infrastructure: Future development plans for the area. These plans are available at the local council.
Employment opportunities: Are these opportunities close to where people will live; if so, that may attract higher rents.
Socio-economic trends: Movement of particular groups of people. For example, in Australia there’s a growing trend for baby boomers (50 plus) to sell their four bedroom suburban houses for coastal or inner city serviced apartments.
Proximity to city: The CBD still has the highest proportion of well paid jobs, shops, health services and public transport.
Keep an eye out for news articles. What major companies are planning projects in which locations? Future employment means high demand for property in the region. Look for sustainable projects by these companies – you don’t want a project that’s going to last for only three years, and then the workers pack up and leave.
Once you have the location, know the demographics of the local area. This can be easily accessed through the state’s statistics bureau. Knowing what type of tenant is likely to rent the property will help you decide which type of property to look for – a house, apartment and how many bedrooms.
If it’s an inner city location, you may be looking at renting to professionals, hence a two-bedroom apartment would be more in demand. Remember, you’re not buying something that you would necessarily live in yourself; it’s an investment, so it needs to be viewed from an investor’s point of view.
4. Investment Property Checklist
Once you know the location and demographics, it’s time to start zeroing in on the property. If you keep these items in mind, you’ll narrow down your options.
• A car space can add tens of thousands of dollars.
• A property needs to have “good bones” or structure.
• Apartments or houses with a southeast aspect are usually warmer and lighter; (northeast for the southern hemisphere).
• North-facing properties are colder in winter and can be prone to dampness; (south-facing in the southern hemisphere).
• Large apartments (anything more than two bedrooms) needs internal laundry facilities.
• Properties with two bedrooms or more need two bathrooms.
• Big, open-plan living areas are popular, as are studies that can be converted into bedrooms.
• Buy scalable properties that can be extended – but check the permitted floor space ratio.
• Backyards are better than front yards.
• Never invest in areas of oversupply.
The main points to remember when investing are that any time is the right time to invest – it’s not about “timing the market,” it’s about “time in the market.” If interest rates start to rise, lock the rates in for two to three years and ride out the downturn. Invest in quality, well researched projects.
5. Buy and Hold
Live within your means, save as much as you can and buy property as soon as you can afford it. Just think, in 10 years’ time, people will marvel at how cheap current property prices are. So start now, because staying out of the property market is costing you money.
For more information on buying property in Australia, email Kim Bindon, a property investment specialist in Australia, at Kimb@aviategroup.com.au.