15 Aug 2017

Considering An Investment Home? Top Tips For Investors

Considering An Investment Home? Top Tips For Investors

Are you new to investing? Read below for a rundown on some the most common options available in Australia today if you’re looking to real estate as a place to grow your wealth.

Many people start small and buy in locations that they know or personally see potential for steady growth. In this instance, general advice is to follow is to select property close to transport and facilities as this will encourage ongoing tenancies when you’re ready to lease it out. In fact, in Australia the majority of the private rental market is owned by small-scale or ‘Mum and Dad investors’. You may also be aware of the negative gearing tax rule that allows rental property losses to be tax deductible against your personal taxable income. If you invest in this way, timing is everything, ideally you’ll want to buy just before prices rise in an area and avoid buying at a cycle’s peak, especially if purchasing a unit or apartment rather than a house.

The best house and land packages can also offer sound returns for the savvy investor. As many of these new estates tend to be located in peripheral locations around Melbourne or even further afield, an investor should expect to hold onto these for the longer term as growth is typically slower in the outer suburban ring. As with homes in any location, their proximity or access to services and facilities will also play a role in future growth. When buying further out in areas that attract families or promote retirement living for example, look for infrastructure that supports these demographics specifically.

Another option is to invest in a property fund. This could be a wholesale fund, unlisted retail fund, a syndicate, or a listed property trust to name a few. One of the reasons that people choose this as an investment pathway is to buy into markets that are otherwise difficult for individuals to access, especially if you’re not in an associated industry. Also, fund managers will coordinate this activity for you, making it a set and forget type of asset for the time poor individual. These funds could include interests in the private property equity market or commercial properties not available to the public.  Therefore, to add this type of investment to your portfolio you will typically need to do so through a larger institutional investor who manages this on your behalf.

In closing, do be wary of generalisations with regard to property investing as they’re limited in their ability to predict future growth due to the diversity of the sector as a whole. Local pockets will have their own patterns in terms of growth and although they can be statistically averaged out across a state or Australia as a whole, for the individual it is not as useful when you’re trying to identify a single real estate opportunity. Therefore, particularly for the novice, always chat to a financial advisor that can determine how to best configure your circumstances to maximise long term returns.

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