If you can afford to buy a home today, or an investment property, my advice is do it and tell anyone you care about to do the same.
Yes, rising interest rates and property price hikes have some would-be investors nervous, but with the right advice and some pre-planning it may be the best decision you ever make.
A lot of people get bogged down in the noise of the 24/7 news cycle and the forecasts of doom and gloom from commentators who don’t really understand the market.
Now, I’m not saying it’s easy, but for those looking to buy, now is the time to get everything in order.
The first step prospective investors need to make is to get their finances in order. That means saving a deposit and creating a budget.
A good detox kick-start could involve cancelling all of your credit cards. That will put a stop to all the direct debits, and when retailers contact you to re-establish the withdrawals you can weigh up whether it is something you want.
As inconvenient as it can be having to re-establish them all, it can help would-be investors unlock plenty of cash that was going to waste on multiple streaming services or unused gyms memberships.
When it’s finally time to buy, the most important thing to do is find a mortgage broker. Many first-time investors immediately go to one of the big four banks, but a good mortgage broker will help you set the right structure and borrow from the right lenders. The banks change their policies more often than I change my sheets. Therefore, it pays to have as many options as possible and a good broker will make sure of that.
It’s also important to assemble a team before finding a property. In the current market, moving fast is important so it’s worthwhile spending time finding an accountant, property management agent and insurance broker to help things move quickly once the right property comes up.
Affordable investment options
It can seem like prices are constantly rising and that investors need to have a lot of money to get into the property market, but that’s not the case.
There are still plenty of suburbs that offer good investment opportunities to ‘mum and dad’ investors.
The most important thing to keep in mind when selecting an investment location is to ensure it is in an area with a growing population and close to major employers and infrastructure.
Hospitals, schools, education facilities, and large retail centres all employ hundreds (if not thousands) of people who want to rent near where they work, so buying in an area close to some of these facilities is a great starting point.
Do some research about incomes in the area, what average rents are in the suburb, and ensure the rent you are wanting to charge doesn’t exceed 30 per cent of the household income.
This will narrow your investment property search down and allow you to invest in something in demand that will be rented quickly and often.
Cash flow is king
The biggest risk for investors is cash flow. Good property will grow in value over time, but you’ve got to be able to get by in the process.
Therefore, it’s important the property pays for itself out of the rent or tax refunds afforded by negative gearing.
New property offers the best tax deductions (you can depreciate 100 per cent of the house cost), lowest maintenance costs, and are generally more in demand than older properties.
With the average Australian paying more than $20,000 in tax each year, it makes sense to try and get some of that tax back to assist with the cost of your investment property.
