Investing in Property
“Becoming successful in property investing requires a thorough understanding of common pitfalls; knowing how, where & what type of property to buy, and how much to pay for it.”
We believe the key to financial freedom is to invest in safe assets mainly using other people’s money (The Banks) with the potential for solid capital growth and to hold onto these assets for the medium to long term.
The Investment Vehicle of Choice:
Whether you would like a more comfortable retirement, a better work-life balance, to travel the world or simply have more funds to put towards those important things like family and health, it’s universally agreed that you need to do more than rely on the old age pension.
The most viable way to build wealth and generate substantial income over the long term is through investing. And one of the most safe, secure and high performing assets to invest in is property.
Achieving financial freedom brings increased opportunity and opens the door to more options in life. Yet, only a select few will use the power of property investing to really change their life and the lives of those they love for the better. Will you be one of them?
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Property has long been an attractive choice for Australian investors – and for very good reason.
While markets will fluctuate depending on geographic location, property in Australia on average doubles every eight to twelve years.
Investors that do their research, have a good understanding of their goals and take a long term approach will therefore usually realise good results from investing in property.
But it is not just the opportunity for capital growth that makes property a sound investment for the long term.
The opportunity to leverage your investment is one of the most compelling arguments in favour of buying property – no matter where we are in the market cycle.
Good reason to invest in property
Investing in property is a sound investment strategy for Australians that are focused, educated and proactive.
Property investment has long been a favourite with Australians and with good reason. Over the generations and numerous market cycles it has delivered solid returns and created lasting wealth for hundreds of thousands of everyday people.
Property investment is not as complex as investments such as stocks and shares, bonds or other financial products.
The investment principles involved in property are also relatively simple and, with the right approach, realistic objectives and plenty of groundwork, the risks are comparatively low.
Planning your investment
Key to establishing your investment strategy is deciding whether you’re seeking cash flow or capital growth.
Property ownership is close to the hearts of most Australians and so it’s easy to understand why so many people consider property as a sound investment.
The beauty of property investment is its simplicity, however to achieve the greatest success with your investment strategy you need to be sure of your objectives from the outset.
If there is one trap that new investors fall into, it is not having a clear outline of their investment goals.
Determining your borrowing capacity
The first step in successful property investment is to understand your financial position and borrowing capacity.
Investors need to have a clear understanding of what their goals are before plunging into the property market if they are to maximise their chances of success.
This will include determining if the goal is capital gain or generating cash flow, if it is a long term or short term strategy, and what kind of financing is required.
Making any investment requires diligence but when you’re taking on debt, to help maximise your returns it is essential that you understand your true borrowing capabilities – or to be more precise, your true repayment capabilities.
One of the key reasons why a broker’s support can be so valuable is because there can be a big difference between what you can borrow and what you can actually afford to borrow in order to service a loan on an investment property.
Determining your buying strategy
Before you jump into any property purchase, you need to have a good grasp of your goals, strategy and the eventual outcome you’re seeking.
So you’ve decided to invest in property and you’ve got your pre-approval from your lender – but where to from here?
Before ploughing in to the market, it’s essential that you have a clear buying strategy in place.
And the reason for this is simple: there are so many different options when it comes to property that without a firm idea of what you’re looking for you may well end up buying something that ultimately doesn’t suit your unique investment needs.
Researching the market
The level of research conducted prior to buying a property can have a major impact on the returns you see from your investment.
Whether this is a first foray into property investment or you’re looking to add to your portfolio, you’re buying decisions should always be based on sound market research.
There is potential for investors to build wealth through owning property. Bricks and mortar have delivered solid returns to Australians for many years and it is an investment vehicle that is accessible to people from all walks of life.
But as with any investment opportunity, there are good property buys and bad ones. To ensure you achieve the best possible returns from your investment it’s essential that you do your homework before you buy.
Understanding your tax position
As well as capital growth and cash flow benefits, property investment may help improve your overall tax position.
Property is not just one of the safest investments open to Australians, it can also be tax effective.
The attraction of investment property is the potential for everyday Australians to build long term wealth through a stable investment vehicle. The ability to borrow a significant proportion of the property value not only helps investors get into the market, it also offers excellent potential to maximise returns on their investment.
But the capacity to borrow can also offer investors tax benefits depending on the structure of their property finance, their income and the type of property they invest in.
Owning an investment property can be viewed in a similar light to owning a business.
If the investment property turns a profit – or if the net rental income exceeds the mortgage repayments – the owner will be taxed on the proceeds. However, should the investment property run at a loss over the financial year the owner could offset that loss against other income, reducing the tax you pay.
Unlocking equity for your investment
Existing home owners have a distinct advantage over first time buyers when it comes to breaking into property investment.
One of the biggest hurdles to buying property is raising a deposit, but existing home owners may be able to sidestep this obstacle when it comes to purchasing investment property.
Depending on how long you’ve owned your own home and how much it has increased in value over the years, there’s a good chance that you could have the deposit for your first investment property already locked away in equity in your home.
Equity refers to difference between the value of your property and what you owe. As the value of your property rises over the years – and your loan decreases – the amount of equity will grow.
The good news for home owners is that this equity can be released without having to sell your property.
You may be able to refinance your property at the current higher value, opening up additional funds which could be used as a down payment on an investment property – potentially saving years of saving for a deposit.
It’s important to note that you are effectively borrowing the deposit for your investment property against your own home and this will increase your mortgage repayments. The interest you’ll be paying on the additional loan will be at your mortgage rate – which is likely to be lower than most other loans.