As property prices continue to climb, vacancy rates remain tight and interest rates at record lows, now is a great time to become a property investor.
Over the last 12 months, property prices have grown by almost eight per cent across the combined capital cities.
While some capital cities have ultimately performed better than others, most have recorded positive growth.
This ongoing growth in property values, combined with record low interest rates and tight vacancy rates, is helping to make property investment attractive to potential investors, which is why an increasing number of Australians (of all ages) are deciding to do just that.
Over the last few decades, property has proven itself to be a lucrative investment, making the old adage ‘safe as houses’ as true as ever.
Of course, with a median dwelling value of $595,000 for Australia’s capital cities, it can be hard for potential investors, especially first timers, to save the deposit needed to secure finance and buy an investment property.
So what can investors, especially those under 30, do to secure themselves an investment property?
Consider a shared investment
For those who can’t afford to buy an investment property on their own, it might be worth asking family members whether or not they are interested in becoming property investors.
If a potential investor decides to buy with a family member, not only will they improve their borrowing capacity, but they will effectively stop themselves from taking on more debt than they can handle. Many investors also find they are able to qualify for lower interest payments on a mortgage when using this technique.
However, it's important for young investors to cover themselves when making a joint investment. A contract should be written up to outline the rights and responsibilities of each party in regards to the investment. This will help to protect both parties in the event that the relationship sours or one party needs to sell.
Own while renting
Many young people are discovering that the key to being a successful landlord is also being a tenant at the same time. Some investors, especially younger investors, simply do not have the funds to purchase both an owner-occupied dwelling and an investment property. Buying an investment property before an owner-occupied property allows young investors to yield income in the present while owning and building substantial asset for the future.
For those who do decide to buy an investment property before an owner-occupied property, it is important for them to remember that they are not always going to be a tenant. Young first time buyers need to remember that while their financial resources are limited now, investing in real estate can help them to put their foot on the property ladder and future-proof their wealth.
Keep risk under control
Property investment involves some level of risk, but first time investors do have the opportunity to keep this risk to a minimum by properly planning their purchase. One way to keep risk under control when purchasing an investment property is by purchasing in a popular area. Some new landlords find that they're unable to rent out a home or apartment because of high crime or a lack of nearby amenities, so it's best to buy a building that is in the middle of everything.
Another way to keep risk under control is by researching popular rental properties in the area. First time investors could find that apartments are more popular with renters and, as such, it pays to purchase this type of property.
While many younger Australians have the opportunity to set themselves up for the future by investing in real estate, purchasing an investment property is a decision that takes careful planning. With that said, it is critically important for young investors to speak to a professional before diving into the property market.
Bob Korver is the owner of the Mortgage Choice Eight Mile Plains franchise in Queensland. He has more than 20 years’ experience in financial services, having held various senior positions at one of Australia’s major banks before joining Mortgage Choice in 2011.
With a Certificate IV in Financial Services and a Diploma of Finance and Mortgage Broking Management, Bob is well equipped to help his customers with a wide range of enquiries, including business lending, commercial property finance, equipment finance, car loans, personal loans and home loans.
Traditionally known for providing customers with expert home loan advice, today Mortgage Choice in Eight Mile Plains is well equipped to help customers with more than their home loan needs. The franchise can also help customers with their broader financial needs, including but not limited to, commercial loans, personal loans, business lending, equipment finance and even car loans.