The Australian property market has been going strong, with a lot of the activity fuelled by investors. With interest rates at historically low levels, many people are considering the purchasing their first investment property. But making a profit from an investment property isn’t guaranteed – here’s a few property investment secrets that may help you get started when finding that first investment gem.
Go for capital growth
Capital growth is the term used for a property appreciating in value. Some properties appreciate in value more than others over time. The trick to making a profit from an investment property is choosing a property with capital growth potential to purchase in the first place. Research is key to making the right choice.
To be sure of capital growth, target properties in up and coming areas and adjacent to popular areas. These are likely to gain value as the suburb develops. You can also look for “ugly duckling” properties in these areas – or properties that you can improve at little expense. This will also help you to ensure capital growth. Another good idea is to look for new rezoning opportunities and get in before word spreads. These areas are likely to move from more industrial zoning to residential and can often be found in inner city suburbs where capital growth is more likely to occur over time.
Choose the right location
Choosing the right location will not only help to ensure capital growth, it will also ensure that your property is always tenanted. Inner city is often best as properties in these suburbs hold their value better and are easier to rent and sell quickly.
Try to purchase a property that’s near to essential facilities like schools, public transport, shopping areas and leisure facilities like parks, cafes, restaurants and cinemas. It makes it much easier to find good tenants and will help to ensure optimal rental returns. You can often find a bargain where these facilities are planned or under construction.
Try to buy below market value
It sounds like a no-brainer, but many people make property purchases with their hearts and not their heads! When trying to obtain a property at a below market value price, it’s important to find out what the market value is first (we can help you with this – just ask us for assistance). Then you can negotiate! Drive a hard bargain by picking out the property’s faults and leveraging them.
You can also look for distressed properties. These include homes in need of an update or renovation, mortgagee and deceased estate auctions, those that have been sitting on the market for a long time and those that have been passed in at auction and not sold.
You can also look for private sales or approach owners of properties you like directly. You can often get a property for less if there’s no agents fees involved. Be prepared to meet the vendor’s wish list in terms of settlement periods and conditions of sale. This should also help you to obtain a good price.
Get to know the agents
Choose an area and get to know all the real estate agents. Agents will often call their investor clients when they have a property requiring a quick sale – which is an opportunity for you to get it at a good price. Knowing the agents will also help you to view new property listings sooner and help you keep your finger on the pulse of listings that have been on the market for a while. These represent opportunities where you may be able to negotiate on price.
Over time, you can also identify agents who tend to over quote prices to their vendors. These properties often sit on the market for a long time and risk becoming stale. If this is the case, you can sometimes swoop in and ‘rescue’ the vendor with a low offer.
Do your homework
It is often said that the longer you hold a high quality investment property, the more likely you are to make a profit. The key here is the words ‘high quality’. Time is no guarantee that you will turn a profit on every property investment. We can’t stress enough how important it is to do your homework to make sure you’re buying a property with real capital growth potential in the first place.
You see a lot of shows on TV where people renovate houses to sell quickly for a profit. Between capital gains tax and people not being prepared to pay for your décor choices and renovations, this can be a very risky business. If you plan to take this route, you need to research not only the property’s potential market value once renovated, but also the actual cost of the renovations very carefully. Being prepared to hold the property for a length of time gives you the opportunity to choose when to sell for maximum capital gains – quick turnovers do not give you this option and are subject to market variations.
If you’re planning to invest in property, it also pays to do your homework on the taxation aspects of investing to make sure you get the full benefits. Talk to a taxation expert before you begin. It also pays to get expert advice on setting up your investment financing. For more information on financing your investment property or a referral to a tax expert, don’t hesitate to get in touch with us today!
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(REPRODUCED WITH PERMISSION FROM CONNECTIVE AGGREGATION)