Last Updated on March 10, 2023 by Hassan Abbas
It’s not a matter of just buying property as an investment, it’s a matter of knowing which property types to avoid and which ones to take a chance on. The way I see it is:
Most Investment Property Is Not Best ChoiceThe most common property investment is a residential property. With close to 400,000 homes being constructed per year in Australia, you would think it’s a slam-dunk. But is it? We can help source UK Buy to Let Properties.
Table of Contents
The range of choices is huge
When it comes to investment property in Australia, you can’t choose your poison, as many properties will have similar characteristics, but that is where the similarity ends and you must research all the options thoroughly before purchasing. I have been involved in selling and purchasing numerous properties in the past and I may hold some logical position that may cause you some debate.
Investing in property used to be about as safe as placing all your eggs in one basket and I have always been gradually moving towards my better understanding of this, but I’m still not outdone by it still.
Should I have just bought a house?
Although investing in property used to be about as safe as buying an air Astor and getting a 33% actual return on it, the last 18 years have shown that there are no truly consistent returns from investment property, but by doing careful research and having patience, you still may get that well-kept dream home or a strong property market in which to invest.
Renovating a property is not always as easy
The merits aside, the cost of renovating a property can be very high and in real terms is still a very expensive investment, so while you may find that you can recoup the cost doing this, your return will usually be lower and the time taken to resell the property may take a great deal longer. This may indeed not be correct for everyone, but investors that are happy to renovate and resell, with better capital growth that comes from renting or leasing the property, are the types that are happy to do this.
Beware returns that appear to be too low
the time to be alarmed about a property that it listed at an extremely low price compared to its actual value or what it would sell for in the current market is likely to be a red flag in the market and fortunately, an investor can do something about it: they can negotiate the price down before the final sale. If all the listed prices of a property do not go over the seller’s price or higher, then either take note of or walk away.
The best returns come from renovation
I’m sorry to say this, but if you bought a fixer-upper and decided to renovate it so that you can resell it for 25% higher than its market value or increase its rental or lease price, you may very likely be one of the very few sales. A common goal of investors is to have a portfolio of properties with above-average returns or a series of rentals that command above-average rents in order to produce a positive cash flow. Any property that you purchase can be improved to raise the rents and make it easier to sell, making this a good buy to those with an eye for money and an understanding of when it’s a good time to buy.
As you grow your portfolio or buy more properties, as they continue to rise in value, your returns from your initial investment will go up with every fixed home sale, and they will also go up when your properties increase in value. Once they prove that you are able to grow your portfolio quickly at the price with which you sell your properties, you will be able to repeat the cycle within a matter of months on the other end.
Property costs are connected to prices
All property investments are like hedgehogs. When the hedgehogs are up against the wall, you would not buy their product at any price because it’s too risky, but if you let them loose, the hedgehogs eat up on your losses until the situation is right again and both the hedgehogs and you win in the end. When the prices go up you get back 10s of thousands of dollars, whereas, if property prices fall, you lose a lot of money.
Homeowners are usually a source of equity
First of all, there are many times when owner-occupiers who never have to touch their equity will be happy to part with it for reasons which include: having to move out of the property to move to work, raising a family, and having to downsize either because they can’t afford it any longer or because they did become unhappy. When a property can be bought in after sustaining the costs of running it for a year or more, a valuable property owner will give up several thousand dollars, if in this example they can’t, they will at least get back all the blood, sweat and tears by offering you their equity, when it can help you grow your portfolio.