Four stages to effective property investment

This process provides a clear and simplistic direction for our clients to ensure they can make an INFORMED COMMERCIAL DECISION.

WHY INVEST?

A few people may stumble into financial security. But for most people, the only way to attain financial security is to save and invest over a long period of time. You just need to have your money work for you. That’s investing.

There are two ways your money can work for you:

• Your money earns money. Someone pays you to use your money for a period of time. You then get your money back plus “interest.” Or, if you buy stock in a company that pays “dividends” to shareholders, the company pays you a portion of its earnings on a regular basis. Now your money is making an “income.”

• You buy something with your money that could increase in value. You become an owner of something that you hope increases in value over time. When you need your money back, you sell it, hoping someone else will pay you more for it.

WHY INVEST IN PROPERTY?

The benefits

• Property can be less volatile than shares or other investments
• You can earn rental income and benefit from capital growth (if your property increases in value over time)
• If you take out a loan to purchase an investment property, interest on the loan and most property expenses can be offset against rental income, for tax purposes
• You are investing in something you can see and touch

The pitfalls

• Rental income may not cover your mortgage payments or other expenses so you may have to use other money to cover these costs
• An increase in interest rates will increase your repayments and decrease your disposable income
• There may be periods of time where you don’t have a tenant and will have to cover all costs yourself
• If the value of the property goes down you could end up owing more than the property is worth, this is known as negative equity
• There are high entry and exit costs such as stamp duty, legal fees and real estate agent’s fees

Where to buy

• Look for areas where high growth is expected, in other words where there is potential for capital gains. Property experts regularly provide tips on up and coming suburbs, just make sure you are aware of any biases they may have
• Look for areas where rental income is high compared to the property value
• Research proposed changes in the suburb that may affect future prices. Things like planned developments or zoning changes can affect the future value of a property.

What to buy

• Look for properties with features that will appeal to as many people as possible, such as a second bathroom, lock up garage or somewhere close to shops, schools and transport
• Look for a property that will attract more than one segment of the rental market such as singles, couples, young families or retires
• Low maintenance costs are important
• Units can be easier to maintain than houses, although you will have to pay body corporate fees

IT'S GREAT TO INVEST IN AUSTRALIA

A resilient economy

Australia’s economic resilience and potential provide a safe, low-risk environment in which to do business.

The country’s economy is rated AAA by all three global rating agencies and is forecast to realise average annual real GDP growth of 2.9 percent between 2016 and 2020.

The Australian economy is:

• the world’s 12thlargest
• in its 25th year of uninterrupted annual growth
• supported by high productivity levels, with 15 out of 20 industries rating above the global average
• an important contributor to five sectors expected to drive future global growth: agribusiness, education, tourism, mining and wealth management
• home to the largest pool of funds under management in the Asian region.