Your investment home guide in Australia – Part 1
Thinking about investing in property, but don’t know exactly what you should be considering? This guide will help you to determine the best options for your needs.
Do you know if you want to invest for capital gains down the track, allowing you to use the home as a holiday destination for the time you own it? Or would you prefer to increase your passive income? You also have to decide what state, city, or suburb you’d like to own an investment property in, and whether you’ll opt for a house, unit, or block of flats.
This two-part investment guide for buying real estate around Australia will help you on your journey to creating wealth!
Read on for part one:
Buying for capital gains
If you buy while the property market is in a wave and you sell when it’s in a trough, you could lose money.
If you’re buying a property that you know you’ll keep for a number of years, you could accrue significant capital gains. This is the amount the property is worth when you buy it, compared to when you sell it. However, if you buy while the real estate market is in a wave, or a high point, and you sell when it’s in a trough, or a slump, you could lose money. That’s why it’s so important not to sell your investment home too soon after you buy it.
Take the Victorian suburb of St Kilda East, for example. Smart Property Investment reports that the median house price in the suburb is $1,422,000 – increasing by a whopping 35.43 per cent over the past year. What’s even more impressive is the growth over the past three years. St Kilda East has grown in median house price by 64.39 per cent since 2013. Assuming you bought a house in the suburb for $500,000 three years ago, and the price increased according to the median, it would be worth $821,950 today! That gives you a capital gain of $321,950 – not a bad profit for three years of owning a house, right?
When you’re buying to build a lot of wealth over a short period of time, make sure you buy in a suburb that shows consistent growth.
St Kilda East is not far from the CBD, so will always be in high demand for tenants, if you want to rent out your investment home. When you’re buying to build a lot of wealth over a short period of time (around five years minimum), make sure you buy in a suburb that shows consistent, strong historical growth.
Buying at a low price
When looking to buy at a low price, you might think it’ll be too difficult to get a property close to the CBD, or the main centre you’re looking at. That’s not always the case, however.
Domain Group compiled a list of the most affordable suburbs within a certain distance of the Sydney CBD, for example. When looking at homes for sale, Sydney is the most expensive city in Australia, and the second-most unaffordable city in the world, according to the Demographia International Housing Affordability Survey for 2017.
You can buy affordable property close to the major centres – you just have to know where to look.
That being said, you can still find spots where property is affordable. Take Newtown, which lies within 5kilometres of the CBD. The median unit price there is $620,000. Move a little further out, to within 10kilometres of the city centre, and you’ll find Croydon Park, which has a median unit price of just $482,500.
Of course, those prices are just for units, but it highlights that you can buy affordable property close to the major centres – you just have to know where to look, and spend a little time doing your research.
Having a strict budget shouldn’t take away your ability to buy an investment property, nor should your lack of knowledge about how property gains value over time. When you start your search for a new investment home, whether it’s your first or your fifth, make sure you consider what you want to buy for, and especially what your budget is!