Time To Buy Your First Investment Property?
When it comes to profiting from property, especially in investment properties, timing is everything because you often make your money when you buy not when you sell and if you can buy the right property in the right suburb at the right time you will be set for strong investment growth and returns. So how do you know whether it is the right time for you to enter the property market as an investor? Read on to see whether your situation ticks these boxes:
- You own your home mortgage free, or have been repaying your home for many years and have a very small amount left to repay.
- You have an established super plan and your retirement fund is growing strongly.
- You have a secure job, financial situation and personal situation.
- You have waited for the first home buyers to lose steam (and government funding).
While Australia did not sail through the global financial crisis unscathed, the property markets, especially residential property are moving towards a stronger position by the day. Typically more than 80% of listings have been selling in Melbourne and Sydney, and often when we see an improvement in the Sydney property market, the effects can be expected to filter through to the rest of the country shortly after.
Avoiding the Competition
If you are looking to invest in the residential property market your path is going to be less obstructed than it was in 2008 and 2009 when you would have been competing shoulder to shoulder with orders of first home buyers who had government grants and boosts burning holes in their pockets. This is because the properties which interest first-time buyers are also those which will appeal to you as a first-time investor, those which are affordable to buy but which are in up-and-coming suburbs and as a result can secure a strong rental yield.
In 2009 when the government grants and boosts were maximised, first home buyers represented 40% of all residential property sales in Australia, when normally they would only account for around 15%. With those figures having returned to normal this has made way for investors like you looking for an affordable property, because offenders are no longer able to price you out of the market as they could when demand was higher.
Identifying Strong Rental Yields
It lasts 2 to 3 years the gap between the cost of an investment property and the rent you can expect to charge has been closing thanks to higher rent prices and decreasing property prices. For example house which would previously have been valued at $400,000 can now be found selling for just $350,000 and where you may have only been able to get $350 per week rent you can now expects to receive $400 a week, and these stronger rental yields are good news for you as a first-time investor. In fact based on median house prices and median rents most investors can expect a positive rental return, if you are making interest only repayments and provided a 25% deposit on your investment loan.
While you may want to outlay as little as possible on your investment property do not be pulled into thinking that official interest rates will remain this low forever. Therefore the more you can provide as a deposit the less you have to borrow and the less your repayments will be. Australian lenders are also tightening their eligibility criteria and a 20 to 25% deposit will make it easier for you to secure an investment loan.
Can You Afford To Invest?
If you are a first-time investor who owns or almost owned their own home then using the equity in your property to help you purchase an investment property can be a sound financial move. However just keeping in mind that while the aim of an investment property is to turn a profit and be positively geared for at least the first 2 to 3 years your property may need to be negatively geared as the rental income may not entirely cover your loan repayments and other expenses. Therefore you need to make sure you have the cash flow to be able to afford to keep your investment property maintained and to service your loan.
Related posts:
- Australian Property Investment Guide
- 10 Ways to Find an Investment Property
- What is the best investment property strategy?
- Investment Property Tips & Guides
- Your Equity Investment Property
- Darwin Investment Property Market 2010
- How to determine the Best Investment Property
- Buying your First Investment Property Guide
- Benefits and Disadvantages of Owning an Investment Property
- Things to know about buying an investment property
Top Home Loans
| Home Loan | Details | Interest Rate (p.a.) | Comp Rate^ (p.a.) | App Fee / Ongoing Fee | Max LVR | Min & Max Borrowing | |
|---|---|---|---|---|---|---|---|
 Loans.com.au - Dream Catcher | A home loan offer with a $0 application fee and one of the lowest available home loan interest rates. | 5.85% | 6.21% | $0 / $375 | 80% | $50,000 / $750,000 |
 
|
 Bankwest Online Home Loan | A low interest rate home loan with a $0 application fee and ongoing maintenance fees. This offer is exclusively available by applying online. | 5.97% | 5.97% | $0 / $0 | 80% | $100,000 / $1,000,000 |
|
 Illawarra Home Loans Bank Beater Home Loan | A low variable rate, beaten down even further by 0.05% p.a. after 5 years. | 6.07% | 6.35% | $0 / $345 | 90% | $250,000 / $1,000,000 |
|
 State Custodians Mortgage Company Standard Variable Offset Loan | Awarded Mortgage of the Year 2012 – this multi-award winner features 100% offset and a loyalty 0.25% rate drop after 5 years. | 6.02% | 6.23% | $0 / $345 | 95% | $150,000 / $1,000,000 |
|
Ask A Question