Investing in an interstate property can offer several potential benefits:
- Diversification: Investing in properties across different states can help diversify your property portfolio. This can spread risk as the property market conditions can vary from state to state.
- Potential for Higher Returns: Some interstate markets may offer higher rental yields or capital growth potential than your local market. This could potentially lead to higher returns on your investment.
- Affordability: Depending on where you currently live, you may find that property prices in other states are more affordable, allowing you to enter the property market sooner or buy a higher quality property than you could locally.
- Access to Different Markets: Each state has different property market trends and cycles. Investing interstate allows you to take advantage of these different market conditions, which could potentially lead to better investment outcomes.
- Growth Opportunities: Having broader horizons allow you to identify an interstate location that is poised for growth due to factors such as infrastructure development, population growth, or economic factors, investing in that location could offer strong capital growth potential.
However, it’s important to note that investing interstate also comes with challenges. These can include lack of local market knowledge, a diminished understanding of migration levels and origins, different property tax laws and regulations. It’s crucial to conduct thorough research, consider engaging local professionals and use a property management service.
- Why should I invest in new residential property?
Investing in a new residential property can strategically accelerate your property investment journey. It offers a range of benefits that can contribute to wealth creation and provide a solid foundation for your investment portfolio. Let’s look at some of the key factors in more detail:
Brand New Property Investing in a new property means everything in the home is brand new and under warranty. This can significantly reduce maintenance costs in the early years of ownership.
Depreciation Benefits New properties come with higher depreciation benefits. The newer the property, the more you can claim tax for depreciation of the building and its fixtures and fittings.
Attractive to Tenants New properties are often more appealing to potential tenants, which can lead to lower vacancy rates. They are attracted to modern design, new appliances and often lower energy costs.
Time in Market Buying off-plan or building allows you to start your ownership when you complete the contract. However, you do not have the entire debt until the property is finished and ready to tenant. This gives you the advantage of time in the market, potentially increasing the property’s value and return on investment.
Lower Purchase Costs If you decide to buy land and build (house and land), you have other benefits of reduced stamp duty and only increasing your loan as work is completed.
Future Costs Investing in a new property avoids costly capital costs avoiding the need for future renovation or improvements.
Non-Emotional Decision: Investing in new residential property provides an opportunity to make data-driven decisions. You can assess market data and future growth potential, leading to more strategic investment choices. This contrasts with buying existing properties, where emotional factors sometimes influence decisions. For instance, bidders can get caught up in the competitive atmosphere at auctions and overpay for a property based on emotion rather than data. By focusing on new properties, you can approach your investment with a clear, analytical perspective, ensuring your decisions align with your investment goals and strategy.
To illustrate these benefits, let’s look at a couple of case studies:
Case Study 1: Off-Plan Apartment Purchase John purchased an off-plan apartment. He paid a 10% deposit and did not have to pay the balance until the apartment was completed two years later. During this time, the property market experienced growth, and the value of his apartment increased by 15%. He was able to benefit from the property’s appreciation without having to service a loan on the total purchase price during the construction period.
Case Study 2: House and Land Package Sarah purchased a house and land package. She only had to pay stamp duty on the land component, saving her thousands of dollars. Sarah also had the advantage of progressively increasing her loan as construction milestones were reached, helping her manage her cash flow. Additionally, as the loan was drawn down slowly, she benefited from time in the market, potentially increasing the property’s value and return on investment.
As your Property Investment Advisor, my team and I are committed to guiding you through your property investment journey. We will assist in reviewing all necessary modelling to understand the investment numbers and metrics, helping you make informed decisions that align with your investment goals.
Investing in new residential property can offer many benefits. Ensuring research driven decision and a clear understanding of any assets market is essential. We are here to provide the necessary guidance and support. Together we will carefully assess your property investment strategies, goals and target outcomes.
Remember, your investment journey is our priority. We are dedicated to helping you navigate the property market and work towards achieving your investment goals with confidence.
- Building Wealth Through Property Investment
Embarking on the property investment journey might seem like a daunting endeavour. A significant financial commitment necessitates detailed planning, thoughtful deliberation and a pinch of audacity. Yet, this journey can lead you towards impressive wealth accumulation and lasting financial stability when navigated astutely. As your dedicated property investment advisor, I will provide guidance, ease your apprehensions and empower you to make informed decisions that align with your financial objectives through property investment.
Compelling Advantages of Property Investment
The charm of property investment is anchored in its resilient potential for sustained wealth generation. Residential property investment can yield dual income streams – rental income and capital appreciation. Rental returns can offset the expenses linked with property ownership, such as mortgage repayments, maintenance and property management fees. Simultaneously, capital appreciation presents the opportunity for substantial profit as the property value escalates over time.
Furthermore, property investment offers leverage – the ability to utilise borrowed funds to procure a better-quality asset, potentially enhancing your return on investment. This strategy, when administered wisely, can accelerate your wealth creation trajectory.
Embrace the Journey with Assurance
Initiating a property investment journey might stir up some trepidation. However, it is critical to realise that you are part of a growing community of Australians turning to property investment to safeguard their financial futures. According to recent data from the Australian Taxation Office, approximately 2.2 million Australians owned at least one investment property as of 2020, with a substantial segment owning multiple properties. These figures affirm the growing reliance on and success of property investment as a wealth creation strategy.
- Buying in a researched location versus your local area
When considering the choice between investing in a researched location versus the location you live in, there are several key factors to consider:
- Knowledge of the Area: Living in a location provides firsthand knowledge of the area, including its amenities, lifestyle, and potential drawbacks. However, investing in a researched location requires thorough investigation to gain a similar level of understanding.
- Investment Objectives: Your investment objectives can influence your choice. If you’re seeking capital growth, a researched location with strong growth indicators might be more suitable. Conversely, if you’re looking for rental yield, then investing in an area high rental demand and limited stock could be beneficial.
- Diversification: Investing in a researched location can provide diversification, reducing the risk associated with having all your investments in one market. If the property market in your local area experiences a downturn or a flat spot, having properties in other locations can help balance your portfolio and provide alternate opportunities for growth.
- Property Management: Regardless of the location of your investment property, we strongly recommend engaging a property manager from our approved panel, introduced by our ASPIRE Concierge services team. This approach ensures professional management of your property and allows you to maintain an “investment” mindset, focusing on strategic decisions rather than day-to-day operations.
- Emotional Bias: Investing in the area you live in can sometimes lead to emotional decisions rather than purely financial ones. It’s important to ensure that any investment decisions are driven by sound financial reasoning and not personal attachment.
There is a big difference between speaking with a real estate agent, who is engaged to sell a property, their defined loyalty lies with the vendor, not the purchaser. As your Property Investment Advisor, I’m here to provide professional guidance and leverage my expertise and network of support professionals to help you build your portfolio.
- What is an exit strategy?
An investment exit strategy, particularly in the context of residential property, is a plan that outlines how you intend to exit your investment or what the investor hopes to make from the property, typically through selling or otherwise disposing of the asset. This strategy is usually formulated before the investment is made and is a critical part of the investment decision-making process.
The thought is you make money when you buy a property, not when you sell. Another way of putting it is to start with the end in mind. An exit strategy is one of the most important things to consider before purchasing a property. It involves thinking about potential scenarios, including what happens if things go wrong, how to minimise the downside, and how to maximise the upside. Regularly revisiting your exit strategy ensures you stay ahead of the game and maintain a clear understanding of your portfolio’s value.
Your exit strategy should also consider your target market – who is likely to purchase your property when you decide to sell? For instance, if you’ve invested in a student accommodation property, your likely purchaser will be an investor and since the property is now second-hand, it would likely need to be a local investor who isn’t seeking the tax benefits that come with a brand new building. The same philosophy applies to serviced apartments and defence housing.
On the other hand, if you’ve invested in a residential apartment, townhouse, or house that’s rented under a standard tenancy agreement, your target market could be local investors or owner-occupiers. In the case of investors, they must be comfortable purchasing a second-hand property without the maximum depreciation of a brand new property.
For owner-occupiers, consider the pool of potential purchasers for your type of property, much like you would consider your potential tenant pool in a rental situation. For example, a two-bedroom apartment in a particular location might be suitable for a range of demographics, including single individuals, couples or even families with a child. You’ll need to consider their income demographic and whether they’re likely to afford a mortgage and deposit. Census data can provide valuable insights for making these investment decisions.
In conclusion, an exit strategy is not just about selling your property. It’s about understanding your target market, anticipating changes, and making informed decisions that align with your investment goals. As your Property Investment Advisor, I’m here to guide you through this process and provide support as you develop and execute your exit strategy.
Here are a few common exit strategies for residential property investment:
- Sell the Property: This is the most straightforward exit strategy. The investor plans to sell the property at a future date, ideally for a profit. The timing of the sale could be based on market conditions, personal financial needs, or a predetermined timeline. The equity realised could be used to pay off other debts, mortgages or to fund lifestyle opportunities.
- Rent the Property: The investor may plan to rent out the property for a steady stream of rental income. This can be a long-term strategy, with the possibility of selling the property at a later date. This strategy may incorporate amortising the associated mortgage over time to provide income without loan repayments.
- Refinance: The investor may plan to refinance the property, potentially drawing out equity to invest in other properties. This can be a way to expand a property portfolio without selling assets.
- Renovate and Sell: Also known as “flipping,” this strategy involves buying a property, improving it through renovations, and then selling it for a profit. This fits more into the adding value strategy than an investment strategy due to its timeframe.
- Lease to Own: In this strategy, the investor rents the property to a tenant who has an option to buy the property after a certain period. This may be a way to assist family members in getting onto the property ladder.
- Passing the Property On: Some investors may plan to hold onto a property for the long term, with the intention of passing it on to their children or other family members for personal use, asset value or cashflow.