The cons and pros of investing in the Australian real estate market and your choice for building a real estate investment portfolio.
Unlike buying a house to live in, an investment property is usually purchased to make money (usually through rental). Therefore, things that may be important when buying a home (such as proximity to your workplace) may not be as important in property investment. There are many reasons why investing in real estate remains a popular choice and is often considered one of the best ways to invest your money. However, mistakes can be costly, so it’s always a good idea to think about why you’re investing in the first place and whether it’s right for you.
Guides For Buying A Real Estate Investment Property
Be Clear About Your Goals
Planning and research can play an important role in the success of your real estate investment. It’s a good idea to consider the realities of real estate investing as well as the potential benefits. Think about why you are investing in the first place and whether this would suit your particular situation; it will also help guide your next steps. For example, you need to make sure that you can cover your loan payments without unduly affecting your lifestyle and consider whether you are comfortable with the risks involved, such as a possible decline in market value or a significant increase in costs.
Do Your Research
There’s a lot to consider: from finding the right suburban apartment or house and how much you can afford to borrow with an investment loan.
It is also a good idea to decide whether you are buying to generate income now or as a long-term investment. Next, look at the potential for continued capital growth, rental income, and the cost of ownership.
Budget Within Your Means
Lenders will generally ask for a minimum deposit of between 10% and 20%. You will also need enough cash upfront for expenses such as stamp duty, transaction fees and legal fees, insurance, maintenance, and loan interest.
Also, consider how your borrowing costs may affect your investment. Many Australians have loans with variable interest rates, which means their borrowing costs can fluctuate. It is important to consider how changes in interest rates may affect your investment and consider options for fixed and split rate loans.
Check Your Credit History
Make sure the credit report details are correct. It’s a good idea to do this before you start inspecting the property. Visit moneysmart.gov.au or ASIC for more resources and information.
Set your deadline
Setting a deadline for saving your deposit and then buying the property will help you take responsibility for your goals and give you something to strive for. However, make sure you know the market conditions and have a flexible mindset in case of changes.
Decide Who Will Manage The Property
If you are short on time or living far away from your investment property, you may want to appoint a property manager or real estate agent. Please note that this service will incur a property management fee.
Consider If You Need Insurance
Natural acts, building repairs, contents and loss of rental income are some of the things to think about. The type of coverage and the premium you will pay can vary greatly depending on the provider and the policy you purchase.
Budget For Small Things
It is not just a deposit that you should consider when saving for an investment property. You may want to do some renovations before renting your property, and you will also need to budget for the ongoing costs of the property.
Self-Managed Super Fund
If you have a Self-Managed Super Fund (SMSF), you may be able to use capital from your SMSF to invest in real estate. Whether you’re considering buying an investment property or investing elsewhere, it’s worth talking to experts to make sure it fits your goals and lifestyle.