When you buy an investment property, you will find yourself making major decisions that will affect your financial stability. For this reason, investing in real estate property can often be a daunting process.This short guide on how to invest in property will take you through a simple approach to navigating market factors that could influence your investment property decision.
1) Research and Understand the Market
If you’re looking at areas to invest, it’s important to know the trends of the market within that unique location. Do some research regarding influential factors, such as if your investment property is within a developing area. Purchasing near infrastructure such as schools, transport networks and shops should be a key rule.
The development of such infrastructure adds further value to an area and will tell you that this area is likely to grow in the future in terms of population and property value. Since investment in real estate is a long term commitment, it is important to look at the future market, not just the current market in an area.
2) Have Goals to Achieve
When you buy investment property, it’s important to keep in mind your reason for doing so – this helps you to keep focused in choosing a property tailored to your investment goals. Two goals you may have in mind are maximising your taxable income and gaining capital growth from that investment property.
- Maximising Taxable Income
Through ‘Negative Gearing’ you can claim tax offsets as a way to leverage off some of the financial loss between your expenses and income from your investment property.
- Capital Growth
This will mean buying an investment property that, over time, will increase in value, thus increasing the capital value of that investment for the future.
It is widely agreed that a good investment property will keep a balance between these two factors, acting as a tax offset until it accumulates enough value to provide an income stream.
3) Know the Market and Understand the Cycle
When looking to buy an investment property, one thing to keep in mind, both on a large market scale (such as the investment property market in Australia) and smaller market scale (such as the state of the market in a particular suburb), is whether it is a sellers’ market, or buyers’ market. A buyers market means there are more sellers than buyers, and vice versa.
A good time to invest is when it is a buyers’ market, because you usually have more room to negotiate on prices and get some additional inclusions. When it is a sellers’ market, buying competition tends to be fiercer and you won’t usually have this room for leverage.
How to Invest in Property – A Summary
Understand what you want from an investment property – the goals of your investment portfolio should be tailored to suit your individual circumstances. But keep in mind the following hints when you are choosing a property:
- Learn how to navigate the investment property market both on a wide and smaller scale.
- Invest in properties within a market with strong future potential, which is best indicated by the development of infrastructure such as schools, transport and shops.
- Know your goals – do you want to increase taxable income or gain capital growth?
- Understand the state of the market – is it a buyers’ market or a sellers’ market?
For more advice on how to invest in property, speak to an industry professional or contact LV Prestige for assistance in your individual process of investing in real estate.