You can buy an investment property without owning a home. Buying a home in Australia is a dream for many, thanks to the security and stability of homeownership. Fortunately, if your short-term or long-term goals do not include homeownership, you can still invest in property. So, here’s all you need to know about buying an investment property in Australia.
Your Property Investment Strategy
Succeeding in investment property requires a well-thought-out strategy and plan. This plan will guide you when looking for investment properties and help you avoid emotional buying. This strategy should account for your finances, the types of property you want to invest in, your ideal locations, and your ideal buyers or renters. It should also account for your risk profile—are you a high-risk or low-risk investor?
Remember to include an exit strategy in your plan. This will help you determine when to exit the real estate market. The property market is bound to fluctuate in the short term. Therefore, you need a data-backed strategy to avoid emotional decision-making.
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Funding Your Properties
Property is a capital-intensive investment. Fortunately, you can fund your investments in several sustainable ways:
Your Savings
Investment properties in Australia require a deposit of up to 20% of the purchase price. If you have the funds, you can pay it from your savings or other investments.
Investment Property Loans
Borrowing to invest is a common strategy among property investors. You can use an investment property loan to buy land or a commercial or residential investment property.
Borrowing to invest carries its risks, including:
- Fluctuating interest rates
- Lower than anticipated returns from your investment
- Fluctuating property value which could lower the capital value of your investment
Due to these risks, shop around for investment loans whose interest you can afford and with friendly terms.
Before you take a loan to fund your investment, consider the additional costs that come with property investment. Some of these costs will vary depending on the province and city you invest in. They include:
- Stamp duty
- Taxes
- Building insurance
- Land tax
- Building inspections
- Agent fees (if you use a property management agent)
- Building repair and maintenance costs
- Lenders mortgage insurance
Knowing all the property acquisition and recurring costs will also help you analyze different properties and the potential returns you can expect.
Choosing the Right Investment Property
Not all properties are equal from an investment perspective. Unlike when buying a home, you’re not looking for a property you could live in but one that meets the buyers’ needs and will make you a profit. The factors that determine the investment-worthiness of a property include:
- The capital growth gains of similar properties in the area
- The location of the property
- The type of property
- The age of the property
- The features of the property and amenities in the neighbourhood
In a Nutshell
You don’t have to buy a home first to begin investing in property. You can start investing in property with the correct information and a sound investment strategy. Ensure to research thoroughly. Use data about property rates, rental yields, and vacancy rates of the area you’re considering. Research the buyer preferences for the location you intend to purchase in before investing. The key is to avoid emotional investing.