Buying property is an exciting experience, particularly if it is your first time. But, it can also be a daunting experience particularly constant press around the property bubble. Therefore it is important to surround yourself with a property investment advisor to determine your investment strategy for financial freedom.
Currently, first home buyers are presented with a booming property market and record low interest rates. Buying property can be done alone or with the help of a trusted property investment advisor to find the right property to meet you needs.
In fact the first step in the process is to approach a mortgage broker to determine your borrowing power. This will depend if the property will be owner occupied or an investment property.
To help you navigate the investment process, we have developed a guide to provide you with things you need when starting out in your property investment journey to financial freedom.
Purchase Price
House and unit prices vary across capital cities with Melbourne and Sydney experiencing exponential growth in the last 10 years. Once you determine your borrowing power, you can begin the property search based on what you can afford.
A property investment adviser will tailor your investment strategy to meet your specific needs.
The role of the property investment advisor
A property investment advisor will have access to a number of research tools to assist the due diligence process to assess the performance of a suburb over time. Data sources such as RP Data will provide information on the performance of a suburb to assist an assessment of performance for units and houses such as:
- Capital growth
- Owner occupied v renters
- Number of sales
- Income ratio
- Population growth
The above factors will assist in predicting future capital growth and yield of your property, increasing the probability of a high performing property in the long term.
The Right Location
The right location is integral in the property selection process and similar factors will be used for owner-occupiers and investment properties. In assessing location in capital cities, there are a number of factors to consider:
Close proximity to certain amenities increases the desirability and value of a location and property; these include:
- Schools
- Public transportation (train/ bus/ tram)
- Public facilities (post office, libraries, parks, medical centres, etc.)
Shops and markets - Lifestyle activities (restaurants, café strips, beach, etc.)
In Melbourne and Sydney, capital growth has been driven by ‘school zones’ where a matter of being inside a school zone may increase the value of a property by up to $200k as opposed to being outside a school zone. This is prevalent with the influx of foreign buyers attracted to high performing public schools.
A property investment advisor will assist you with the proximity of the property to key amenities and their impact on price.
How to ensure Capital growth?
There is no guarantee capital growth in the long term. Similar to the Australian economy or share market – property markets are cyclical and will move up and down based on a number of factors.
Fortunately in Australia, since the recession of the early 1990s, Australia’s property market has grown significantly.
An experienced and knowledgeable property investment advisor will advise you on the factors that will impact capital growth in the area you are researching. They include:
- Proximity to the city
- Population growth
- Property development/ impact on housing supply
- Infrastructure development such as roads/ freeways/ public transport
- Public and Private Schools performance
- Crime and employment rates
- Rental demand including vacancy rates and average rental prices
When selecting an area to purchase a property in, try to avoid those that are likely to be dependent on a sole industry i.e. manufacturing – particularly in regional areas. Although it can be beneficial when the industry is doing well, if it falls, your property’s value may decline as a result.
The Right Property
The right location will direct you to the right property and remember to use your head and not your heart. When searching for a property, you should aim to secure a property which will be in continuous demand by owner occupiers and tenants alike. The right property may include:
- Security
- Safety – A quiet street with good lighting, owner occupiers and tenants like to feel safe
- Living area Plenty of room to move round the house for young professionals and young families.
- Car park
- Undercover parking will provide security and appeal to tenants
If you have a view to develop in the future, the size of the land may be the determining factor as well as the age of the property. Self Managed Super (SMSF) investors favour new rather than established properties due to the long term strategy and the benefits of depreciation.
The Right Return
Many property investors make the crucial mistake of choosing a property based on emotion, rather than finances and logic. An experienced and trust property investment advisor will ensure that you understand the importance of achieving sufficient rental income to service your debt on the investment. The challenge in the current market is to obtain above 4% rental yield given capital growth in capital cities. However this is still achievable with the right property selection considering the current rental market.
If you considering purchasing a property, Redwood is here to help, with a choice of home loans and access to our property investment advisors to help get you started on your journey to financial freedom. Call us on 1300 790 110 for a free consultation
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