Now may be the perfect time to buy your first investment property. Interest rates are at historically low levels, and housing prices continue to rise. While investment properties can be a great way to increase your cash flow and provide a long term capital gain, there are a few things to consider before you take the plunge.
With the median dwelling price in Sydney hitting $650,000, it is becoming increasingly more difficult for first time buyers to get a foot on the property ladder. And prices aren’t going to decrease anytime soon. Between June and August this year, capital city house prices rose 4.2%, the biggest rise during winter months since 2007 (RP data). In these circumstances, the best option could be to buy where you can afford, and rent where you want to live.
An investment property isn’t your home; it’s an asset that will increase in value over time. Research up and coming areas that have great investment potential, and check out locations with a high rental return in order to maximize your long term profit. The Macarthur region is one such area that you should be considering for investing. Mount Annan, near Campbelltwon was named as one of Australia’s top 10 investment suburbs by the Commonwealth Bank in October 2013.
Economics vs. Emotions
Do not lose sight of your economic goals as an investor, even if you fall in love with a particular property. Becoming overly emotional can cause you to spend too much, rather than negotiating the best possible price. Remember, you will not be living in the property. Be sure to buy with your target market in mind. For example, if you’re looking to buy a family home, the property should be close to schools and transport. If you put aside your own personal preferences and buy for your potential tenants, you will have a much better chance of attracting the right sort of tenants and charging a rent which gives you a good yield.
An investment property is a long-term commitment and will not make you wealthy overnight. In order to become a financially successful investor, keep these things in mind:
- Make sure you know your budget (generally, you will need at least a 5-10% deposit), and how much you will need in rental return to ensure your investment is sustainable. Go for a positive geared property if you can (ie: rent covers your expenses).
- Decide whether you want a property that will increase in value, or a property that will yield the most rental return. It is possible to have both of course, but it is better to focus on one main goal, as this will affect your property choice.
- Make a realistic plan and set financial goals.
Buying an investment property is a great way to increase cash flow and capital gain, if you do it right. Do your research, set financial goals and get the right mortgage. Contact us today for free help with buying your investment property.
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