One of the most promising ways to build wealth has been investing in property, especially for those in Australia. The reasons behind this are many- ongoing rental income, long-term capital growth, tax benefits and many more. However, not every residential property in Australia is meant for investment and would rather risk your finances.
Let’s walk you through some tips to follow before you buy a property in Australia with investment in mind.
Understanding Goals
Before you start your home hunt, have clarity on your goals and purpose of buying the property. Whether you want long-term capital growth or just consistent income through rents, you have to be precise.
Your goals determine everything- the location of the property, the type of property and the correct way to finance the same. You can seek professional help if you are unable to come to a decision.
Factors Determining The Investment
There are certain factors that rule how you will generate income and the benefits you will experience.
Location
Location is a prime factor when you plan to buy a property because even the prettiest homes might not generate the desired income. You must look for a property closer to places for an easy commute, schools, hospitals and supermarkets.
The property must have direct access to places for recreation like clubs, shopping malls, and eating outlets or restaurants. If the rental demand is high whereas the vacancy rate is low, it is a must-buy.
Property Type
Houses are generally more expensive but often offer stronger capital growth potential in residential property in Australia. Apartments, on the other hand, are more affordable and can deliver higher rental yields, though they usually involve strata fees. Ultimately, the decision comes down to where you prefer to allocate your budget—toward the purchase price or ongoing strata costs. Your investment goals should guide this choice to help you maximise returns from residential property in Australia.
Condition
Many people tend to run away from old homes or second-hand homes that require some kind of repairs and renovation. Well, they can offer you better price growth than you really expect but maintenance may turn out to be costly in some cases.
On the other hand, a new home requires nothing to be spent on renovations or repairs. However, you might pay a premium price to get benefits like high rent appeal and depreciation benefits from the new home.
Rental Yield
Rental yield is a percentage that determines the wealth you will build from rental income in comparison to the cost you pay for residential property in Australia. The average “good” percentage for rental yield is anywhere above 4%.
It involves the income generated through rent after subtracting expenses and comparing to the cost of the property. The percentage you get after multiplying by 100 determines how better the return will be depending on how high the number is.
Assessing The Potential
There are certain traits commonly found in areas that perform well for residential property in Australia as an investment. These locations may not necessarily be the hottest spots in any region, but they often offer strong long-term potential.
Infrastructures
If you buy a property near to newer train stations or precinct developments, you can witness the demand and attract excellent tenants for the long-term.
Demographics
The area must have a decent growth in population and a steady flow of tenants with low vacancy rates. These factors determine there are fewer properties available in the area and someone might pay you higher than expected to just be a tenant in your property.
Rent Trends
Before making an investment in residential property in Australia, you should gather historical data for the area to analyse market trends. If rental growth has remained steady relative to property values, there may be potential for rents to increase in the near future.
Connectivity
This is again another critical factor that largely determines how good you can generate through rental income. Any investment properties in vicinity to schools, hospitals and public transport will always be in demand.
Mistakes To Avoid
While the smartest of investors can end up making mistakes, you need to be careful to ensure your investment pays off.
- You must prioritize investing in a property your tenants want, not in your dream home.
- It is good to check strata fees and get the property inspection done before putting the money in.
- Avoid taking loans beyond what your pocket allows as there are factors like vacancy period.
- If you avoid investing in high-risk towers, it will work in your favour as you might not have the knowledge to overcome those risks.
Make A Business
You might not run a business without analysing the numbers and whether it would actually deliver the expected results. In the same way, you must keep this in mind while buying a residential property in Australia. You must calculate the flow of cash according to different interest rates to stay on a safer side.
If you spend time understanding loan structures, you’ll be better equipped to choose the right option for your residential property in Australia. It’s also important to plan for management and property maintenance fees before factoring in profits. Lastly, speaking with your accountant about taxes involved in buying residential property in Australia can help you avoid surprises.
Is Property Investment The Right Thing For You?
While you explore your risk profile, you can easily understand why investment properties could be the right thing for you. You must get the answer to what’s right for you and if property is the best source for returns, go ahead confidently.
Doing The Homework
You have your perfect residential property in Australia when you clearly understand your budget and long-term investment goals. Seeking professional help is always the best way to determine what is right for you and to ensure your residential property in Australia delivers the desired outcomes.
Having said that, Equity Maxx could help you take a step ahead towards your goal and make the move at the right time. With the best industry professionals, we are here to listen to your needs before you sign the papers to buy a property made for your goals.
