Property has a well-known reputation for being one of the safest proven long-term investment options. Property investment for beginners doesn’t require a huge amount of knowledge to understand. Plus, unlike shares and derivatives, property is tangible and lacks any extreme volatility.
In many cities all over in Australia, there is a finite amount of space. This will eventually increase demand for property. That means that young investors are almost guaranteed to see a substantial long-term return from property investment if they invest wisely. In fact, the national median house value in Australia has increased by 412%, or $459,900 over the last 25 years!
That said, the property market does contain some complex nuances, and, as with any large investment, there is always risk involved. It’s crucial you approach property investment in Australia with patience. It pays to invest cleverly in high-potential properties, all while mitigating any risk.
Your Guide to Property Investment for Beginners
Consider your property investment strategy
Property investment for beginners can feel overwhelming at first; there are a multitude of potential avenues to consider when it comes to your property investment strategy. You might choose to invest in a property with high rental yields. Unfortunately, however, many of these areas tend to be low growth. That means that if you’re looking to sell in the near future, these properties may not afford much immediate potential. On the other hand, a property with a low income might be negatively geared in the short term. But, if you end up selling it for a large profit years later, it will be worthwhile. It’s important to fully understand all the costs involved and the potential return that can be gained with both of these scenarios.
Another strategy is to buy, renovate and sell your property in quick succession, also known as “flipping”. If you can successfully “flip” a property, you can make a pretty profit. But many people don’t realise that “flipping” is harder than it sounds. You’ll need to ensure you buy and sell at the right times. Your sale price also needs to exceed the cost of having the property unoccupied as well as your renovation, taxes and any other additional costs. Even experienced “flippers” can have a “flop” project, so you’ll also need to ensure you have the financial means to wear a potential loss.
Identify any risks
Before you begin investing, it’s important you consider any risks, particularly if you’re taking out a home loan. Consider your financial position and determine what you can realistically afford, even in the eventuality that interest rates increase. If you’re borrowing more than 90% of the value of the property you want to buy, you should be even more aware of interest rate fluctuations and other risks. Ideally, the areas you consider buying in should be low-risk and in high demand. It should have access to transport and a low potential of natural disasters like bushfires.
Find the right property at the right price
Despite what the market looks like, there are always bargains to be found in real estate if you’re not too picky about which location you’re looking to buy in. Once you’ve determined your budget, you can start to narrow down which suburbs you’re interested in buying in. These suburbs should, ideally, have good access to public transport, have a range of amenities and shops close by, and have nearby access to employment opportunities.
When considering buying in a particular area, it’s important to monitor the market. Pay attention to short and long-term trends in property values and be on the lookout for changing rental yields. Take notice of how long properties are up on the market before being sold. You’ll also need to take into consideration any additional costs that come with owning a property, like rates and water. If you’re buying an apartment, consider strata fees and look at the state of the property as a whole, taking into account the funds the strata building currently has. For instance, is the building in disrepair, or has it recently been updated? Does the unit building have property features that require a significant cost to maintain, for instance, a pool, a dated lift or our favourite topic, combustible cladding?
Be aware of the negotiation and purchasing process
Having a thorough understanding of the process of negotiation and purchasing is crucial. Property investment for beginners can be intimidating. Many first-time investors don’t realise just how much leeway is available when they’re looking to negotiate. This includes negotiating not just the purchase price but also the deposit, the settlement terms and even what is left in the property. That said, there’s no need to overcomplicate the process by negotiating on every imaginable term.
When it comes to property investment for beginners, it’s crucial that you absorb as much information as you can. You need to ensure you can mitigate risk and get the best deal possible when investing. To learn more, explore property investment blogs for expert advice.
Or, if you’re looking to buy an investment property, we can help you find a property that suits your budget and your unique situation. If you already have an existing property you’d like to rent, we are also experienced property managers, and can help you out in finding the right tenants. Contact us for a no-obligation chat.