There is only one constant in real estate investing – that is, there is none.
Everything changes. it's the nature of the beast. Market cycles are changing. External factors change. Economies are developing and contracting, financial markets are reacting to various pressures, interest rates are rising and falling, and in the midst of all this, real estate investors are struggling to overcome the challenges of change for the time being. make a profit.
More than ever, it is essential that investors take a long-term view of their real estate projects. We have had phenomenal growth in Sydney and Melbourne over the last five years, but this time is behind us.
The next question is: how to get ahead in 2019? How can we continue to invest and develop our portfolios to lay the foundation for sustainable wealth – without taking significant risks along the way?
There are strong arguments for and against houses and units as investment classes, and the right decision depends on your strategy, your budget, and your goals
Step 1: Make sure you can finance the purchase
As the mortgage market moves at a dizzying pace, it is essential that you work with a finance broker or bank to make sure your loan is pre-approved before you make your real estate purchases.
Do not forget that real estate is a costly investment and that the costs of entry and exit are high. In addition to the filing fee and stamp duty, you must take into account the legal costs, such as property transfer costs and construction costs, inspection of strata and pests – this can reach several thousand dollars. The mortgage loan insurance of the lender is another amount to budget, with a depreciation report.
You may need to borrow a substantial amount, and the type of loan you will need will depend on the size of the mortgage and your own needs. Some investors like interest-only loans or lines of credit, but a principal and interest loan will help you build your own equity faster – and may be your only option in today's difficult market.
Step 2: Determine the type of asset you want
Some investors swear in black and blue that houses, not units, are the only way to make money in real estate. Say that to people who bought apartments in downtown Sydney 10 years ago: their profits of more than $ 500,000 tell a different story!
In the end, there are strong arguments for and against both types of properties as investment classes, and the right decision boils down to your strategy, your budget, and your goals.
Housing is obviously more affordable than houses, making it more attractive for investors.
If you buy a unit, look for convenient features for tenants, such as street parking, laundromats, and easy access to public transit.
If you buy a home, look in areas where rental demand is strong, such as the one where the population is relatively young and where there are many families with young children. Once again, the proximity of public transportation and major amenities is important.
Step 3: Search for high quality real estate assets
The first thing to be determined by potential investors is the type of property they wish to buy. It means doing extensive research.
As a general rule, the larger the location, the better the chances that your property will gain value over time and attract suitable tenants. So, choose a neighborhood where the overall quality of the properties is good and the demand of the tenants strong.
The proximity of central business districts and major employment centers helps to ensure good tenant demand. Easy access to public transport such as buses, trams and trains is also important (the key is to be close to these amenities without being too close to noise or pedestrian traffic).
Areas close to hospitals and universities still generate strong demand from tenants for rental housing. The proximity of schools, parks, shopping centers, nurseries and other community facilities can also add value to your home. Plus the neighborhood is beautiful and pleasant, plus your rental investment is secure.
Step 4: Trade in Prices
Many parts of Australia have entered the buyer market phase; that is, there are more properties on the market than interested buyers, so sellers need to be more flexible with respect to their price expectations.
This is where research can really benefit you. If you know that similar properties in the area are selling for around $ 700,000, for example, and the asking price is $ 720,000, but you also have evidence that the value of the properties in that market is decreasing, then nothing prevents you from making a lower bid that reflects these market conditions. Your first offer is only a starting point and you never know the seller's situation. they can simply accept your low-ball offer if they are desperate to move on.
Step 5: Attract the Right Tenants
Before you commit to a property, you must check if you will be able to find a suitable tenant who will help you pay off your mortgage. Visit the Principal Suburban section of Your Investment Property's website for the latest information on vacancy rates, tenant demographics and more.
Try to buy in attractive places where other people wish to live as tenants or landlords, such as downtown suburbs close to many amenities, public transportation and jobs.
It's also a good idea to talk to local property managers, as they can give you an indication of tenant demand in the area. No matter where you buy, remember to ask yourself if there is good access to transportation, education, health, community amenities, entertainment, and parking, as this are essential selling points for buyers and tenants.
Your first offer is only a starting point and you never know the seller's situation. they can simply accept your low-ball offer
COST OF INVESTMENT
Depot
This could require between 5% and 20% of the purchase price, and many banks now want to see evidence of 'real savings'.
LMI
Mortgage insurance of lenders is payable if your deposit is less than 20%; it is a premium that insures the lender and not the borrower.
Stamp duty
A tax funded by the state government when you buy a property usually represents 1 to 4% of the purchase price.
Imprint
The transfer, which legally manages the transfer of the property to your name, costs up to $ 2,000.
Other
Other expenses may include construction and best inspections, purchaser's buyer's fees and settlement advisory rates.
