How to get started in the property investment game
Real estate investors have been quiet during the pandemic but experts say now could be a good time to buy. If you’re thinking about getting started, here’s what you should know.
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The biggest barrier to building wealth through real estate investment is fear: of losing money, of choosing the wrong property, of not understanding the rules, and often the fear of getting started.
Rarely have investors faced this much uncertainty, and many have been sitting on the sidelines during the pandemic, but real estate specialists say now may be a great time to begin.
The latest Australian Taxation Office data shows more than 2.15 million individuals have an interest in a rental property – up more than 603,000 in a decade.
Realestate.com.au chief economist Nerida Conisbee says now is “probably a better time than investors think” to start investing in property.
“Interest rates are incredibly low,” she says.
“A lot of finance restrictions on lending have been relaxed – it’s easier to get finance.”
Billie Christofi, 37, started investing in property at age 16 and now has more than 20 in her portfolio.
She says real estate investment should be a long-term strategy, and she now helps others build property portfolios through her investment and finance business Reventon.
“Regardless of the pandemic we still need to prepare ourselves for retirement, and have goals we are working towards and not stagnating out of fear,” Christofi says.
She says new property investors should do their research, avoid over-borrowing, have financial buffers in place to cover things such as tenant vacancies and interest rate rises, use a team with a track record, and take advantage of grants and developers’ offers.
Buyers’ agent Lloyd Edge says first-time investors should not follow the crowd into the latest investment hot spot “because if you’re hearing about it, chances are you’re too late”.
“It is also important to establish a great team of professionals around you such as a qualified accountant, mortgage broker, solicitor and a buyers’ agent,” says Edge, the author of Positively Geared.
“Remember that Australia is made up of many property markets and it is easy to get caught up with what is happening to the market as a whole.”
Edge says first-time investors should look for properties:
• In areas close to schools, universities and hospitals.
• With great access to public transport.
• In places with a growing population.
• That suit the demographics of the suburb or region.
• In areas that have low supply of available properties.
“Be informed about what incentives, schemes, and grants are available to you and whether you qualify for them,” Edge says.
Rental property self-management business Instarent’s CEO, AJ Chand, says new investors should set themselves a limit and stick to it.
“Before you start going to open for inspections, it is a good idea to get a good understanding of what you can actually afford to spend,” he says.
“It’s also a good idea to gain loan pre-approval from your chosen bank.”
Chand says investors should budget for every possible expense.
“These include solicitors or conveyancing fees – for reviewing the contract of sale and managing the settlement if you are successful in purchasing the property, building and pest inspection fees, strata reports and stamp duty,” he says.
Investors should treat their property purchases as a business decision rather than be swayed by emotions, colour schemes or whether they personally want to live there.
If the numbers stack up, the investment should be a long-term success.
SHOULD YOU INVEST NOW?
The case for:
• Record low interest rates look likely to remain for years.
• The property market remains resilient, boosted by first homebuyer schemes and other incentives.
• Lending rules for investors have been loosened recently.
• Some areas – particularly in the regions – are growing strongly and have a positive outlook.
The case against:
• Home values could fall further in the short-term if unemployment spikes when JobKeeper ends.
• An investor’s own job outlook may be uncertain.
• COVID-19 mortgage repayment deferrals are ending soon, which may cause forced sales.
• Some inner-city apartment markets are distressed right now.
Originally published as How to get started in the property investment game