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Investing in real estate in Australia has always been a fantastic way to supplement your income, especially if you have the capital and the know-how to make it work for you.
There are two types of income return from investment properties. One of the main ones, and most obvious, is the money earned from rental properties.
Buying homes and renting them to tenants for weekly payment is a long term strategy for getting your money's worth back on your investment.
Why Property Investment?
There are a number of benefits to investing in property. As a rental property owner, you're entitled to tax deductions, as you can write off interest on your mortgage or on any credit cards used to make purchases for the property.
This includes insurance, maintenance repairs, and even property taxes.
Of course, it is recommended you speak with a mortgage broker before embarking on these types of endeavours in order to safeguard yourself from any potential problems which may arise.
The second type of income you can gain from an investment property takes even longer to grow than that from rental income, but can be well worth it if you stick to it. This is the money earned as your property increases in value - also known as capital gain.
Property investments are not considered liquid because, unlike other types of investments, you can't quickly withdraw from it for your own needs.
However, sticking with an investment property for a number of years can be well worthwhile - especially if you observe the factors involved, make good decisions and the right choices before purchasing the property.
Choosing A Good Investment Property
These factors - such as the property's location, the type of real estate it is and the historical trends for growth in the area - will all have ramifications on how well your investment property will grow.
For example, if you're hoping to develop your property into a rental success, factoring location into your decision is extremely important.
You'll want to ensure the property falls within the zones of local schools to accommodate for potential young family tenants.
Having relatively close access to local shopping centres, supermarkets, parks, recreation areas and public transport terminals can all also be fantastic things to consider before buying property.
But before you even start looking for property, it pays to ensure your financial situation is in check.
Preparing For Your Investment
One of the first steps to take is to figure out your borrowing capacity - that is, how much you'll be able to borrow from a lender towards your home loan.
They will use your income, living expenses and any outstanding personal debts in order to determine both how much you'll be willing to lend to you and the terms of the loan.
This data is used to ensure you have a good history of borrowing because, ultimately, they want to have confidence that their loan will be repaid punctually and in full.
One of the easiest ways to go about this is simply talking with a mortgage broker. These home loan experts will look at your financial statements and advise you on the best route to take in order to achieve your property investment goals.
Once you know how much you can borrow, the next thing to figure out is the type of loan which suits you best.
Getting an interest fixed rate home loan means that, regardless of market fluctuations, your monthly repayments will stay the same for a determined period of time (usually between three to five years).
This enables you to know exactly how much you'll be paying monthly, allowing you to set your prices and manage your finances accordingly.
On the other hand, a variable rate home loan is influenced by the market. While there is the potential to take advantage of lower interest rates and smaller repayments, being at the whims of the market can make predicting the future difficult.
