Australian Property Investment Advice

Like other types of investment, successful property investment involves correctly knowing when to buy and sell properties.

Generally this requires some degree of predicting future trends and/or knowing that a particular property is undervalued. Investing in homes or apartments has an added benefit in that the investor can earn money by renting or letting the property. If the property is increasing in value, renting or letting increases the investor’s returns; if values decline, some hedge is provided against loss.

Investors can hire a consultant in choosing and managing properties, or alternatively they can do the work themselves and save on consultant and property manager fees. Whichever direction one chooses, it is still best to become as knowledgeable as possible on the subject in order to make informed decisions. Research online or read books on the subject making sure that your sources deal specifically with the market in your region; and if possible in your local area.

A consultant provides professional services including research into the economic situation and the trends in the local market. If there are too many properties in the local market, prices will usually decline making it unfavourable for short term investment. However, there still may be opportunities for long term investment since prices may be low. Consultants as a rule will be familiar with all this information.

A market in which property prices are skyrocketing would seem very attractive, but it is good to remember that properties often become overvalued in such environments. What goes up very fast, often comes down fast as well. Rapidly-rising values may be more attractive in the short term rather than the long term investor depending on specific circumstances.

Consider the area in which the property exists and the going rates for rent or lease. Also, check as to occupancy rates in the areas. You should consider this to make practical assessment of how much you will be able to earn by renting or letting.

For property investors, the key things to consider are the duration that one plans to hold the property; the risk and complexity involved; financing; taxation and possible returns.

Financing is easiest for those who can manage large deposits of up to 20 per cent of the purchase. A variable rate mortgage is a home loan with an interest rate that changes over time. These mortgages have a Standard Variable Rate (SVR) calculated usually at about one or two per cent above the Bank of England’s Bank Rate.

Fixed rate mortgages, as the name implies, are loans that have only one interest rate that you pay for a specified period. Obviously, since the interest rate is predictable, these mortgages are more popular than variable rate mortgages.

Capped rate mortgages can vary over time but never go over a maximum cap over the time period of the mortgage. The actual interest rate that you pay during this period follows the value of the Bank Rate. Tracker mortgages also track the Bank Rate and give you a set percentage from the lender’s Standard Variable Rate.

One can also invest in properties by teaming up with others in “Share to Buy” mortgages that allow up to four parties to enter a combined mortgage at a discount price.

Whatever financing plan you choose, remember that successful property investment requires making highly-informed decisions.