Wednesday, August 22, 2018

property investment

The unsustainable property price rises of recent years have finally slowed and we can feel a sense of balance returning to the real estate market. With tighter lending restrictions in place, it may not seem like the easiest time to start investing, but for savvy first-time investors looking to make the most of their capital, it's actually a perfect time to enter the market. 

Business analysts CoreLogic show that rather than falling, house prices are now plateauing. Population numbers in the east-coast capitals are continuing to surge: Sydney and Brisbane each have a growth rate of 2%, while Melbourne is racing ahead to become our most populous capital, with a growth rate of 2.7%. All these extra people are going to need somewhere to live. 

To further stabilise the market, the Reserve Bank looks likely to keep interest rates at their current historic lows until at least 2020. These current market conditions combine to create a favourable environment and good opportunities for investors. 

To make sure that you are one of the savvy, well-informed investors, here's what you need to do:

Do your homework

Houses in good areas with access to schools, transport and amenities will always be in hot demand and though they may carry a premium price, they will attract a good rental and yield strong capital growth. Look for areas of low supply and high demand. Try to buy off-market and consider using a buyer's agent to help you. If you are looking for an apartment, go for areas with fewer apartment buildings and smaller, more boutique developments. 

New apartments have been soaring into our cities' skylines, meaning that in some areas there is an over-supply. This glut of new builds has led to a rise in so-called 'property investment companies', selling (often lower quality) apartments on behalf of developers for premium prices to unsuspecting buyers - and earning significant commissions, that are all built into your purchase price. If the units in a new build are being targeted primarily at investors, rather than owner-occupiers, alarm bells should ring, as they are unlikely to make healthy capital gains. 

If you purchase an apartment that is marketed as an investment property, in a block of investment properties, you are restricting your eventual sale to other investors, who will always be looking for a bargain. And in a block of 50 or 100+ apartments, you may find yourself competing with a number of other investors looking to liquidate at the same time. 

So don't limit your sales potential to investors only. Instead, look for properties that will also appeal to owner-occupiers when the time comes to sell. These people are much more likely to pay more for a home they really want. 

Once you have found a property you want to buy, it's essential to do your due diligence. Look at recent sales in the area and talk to local real estate agents; ask them for their opinions on current market values and rental prices. Never rely on just one source of information before you buy - gather as much intelligence as you possibly can. 

Make a plan

Like anything in life, your investment will be more successful if you have a plan. Before you invest, take the time to define your ultimate goal, timeframe and what you hope to achieve along the way. Ask yourself why you are investing. Is it for a secure retirement or your children's education? Are you looking for long-term rental returns, and are you fully aware of the responsibilities of becoming a landlord? What are the tax implications of your purchase? It's a good idea to talk to your accountant before you begin your investment journey to establish the right structure for your purchases. Consider your exit strategy to ensure you set things up correctly from the start to achieve your desired result. 

Without a clear view of your financial future, you won't be able to draw a roadmap to guide you.

Do the maths

As with all investments, finance and budget planning is the key. The royal commission has brought the banks' practices into the spotlight, and inevitably, their lending criteria has become pretty tight. That's why it's essential to talk to an expert mortgage-broking professional, one with access to a large range of products from first- and second-tier lenders. 

A good broker will add value to your investment strategy, advising how to release equity from your first investment property after a few years to help fund your second purchase and so on.

Use your broker's inside knowledge and expertise to match you with the right loan - one that will help you onto the first rung of the investment ladder... and one step closer to financial freedom.

house hunting

Never lose out on the perfect property just because you don't have your finances in place. The home hunting frenzy may have settled down a little, but there is still some fierce competition out there for the right properties. Do yourself a huge favour and before you start your property search, get your finances in order and arm yourself with a mortgage pre-approval. If you don't have one in place, you could find yourself losing out to a more savvy buyer, while you scrabble around to get your finance approved. Any advantage you can obtain over your fellow house hunters is going to work in your favour. Having your pre-approval letter to show an agent gives you an instant edge over those who have yet to arrange finance. 

Time is of the essence

Despite the online automation of many aspects of finance, unfortunately arranging a mortgage is still a time-consuming and often manual process. The queues with lenders are long, and currently can stretch to three weeks... and that's if everything runs smoothly. If any issues arise, the extra time it takes to find the correct documentation and recheck things can lengthen the process. You can reduce the time it takes to secure your finance by using a good broker, who knows how to push things through the system and addresses most of the issues that may present themselves without having to bother you. 

By arranging your finance before you start your property search, you can shop with confidence in the knowledge that you can act quickly and make an offer or bid at auction as soon as you find the perfect place. 

Find out how much you can spend

The process of applying for your pre-approval will give you a clear outline of your budget and your future mortgage repayments. And you will know exactly how much you are able to borrow. This will allow you to focus your search within a clear price range - saving you time and potential disappointment. 

Beat the stress

House hunting is stressful enough at the best of times - and even more so when problems occur. By organising your mortgage pre-approval, you'll smooth out many of the bumps in the journey to your new home before you encounter them. Engaging a top-notch broker will not only help you find the best mortgage to meet your financial needs, it will give you access to the wealth of industry know-how they have at their fingertips. As well as being able to answer all your house-hunting questions, they will be able to recommend other trusted professionals that will help you - including conveyancers, financial planners, and insurance brokers to ensure the transition into your new home runs as quickly and smoothly as possible. 

Happy house-hunting...


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Contact Details

Zippy Finance 

PO Box 3078
North Turramurra
NSW 2074

T 1300 855 022 

Louisa Sanghera is a credit representative (437236) of BLSSA Pty Ltd ACN 117 651 760.  Australian Credit Licence 391237. ABN 85 168 278 975.

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