Regardless of whether you’re a Baby Boomer, Gen X or Gen Y, buying your first investment property may seem daunting.
Buying an investment property can be an expensive, time consuming and sometimes confusing process. Often, when deciding whether or not property investment is the right decision for you, you may ask yourself:
- Will the initial costs to purchase an investment property be incredibly high?
- What if I can’t sell the property if I need to?
- Will I have the money to cover all of the necessary expenses (mortgage repayments / property maintenance and so on) if I can’t rent the property out straight away?
If you don’t do your due diligence, these questions might have you running away faster than Jamaica’s Usain Bolt, but hold your horses: buying an investment property might be more achievable than you think.
Buying an investment property and kick-starting your own property investment portfolio isn’t just for the wealthy. Anyone can be a property investor so long as they do their research and have the right investment strategy in place from day one.
Of course, just because anyone can be a property investor, doesn’t mean to say they should be a property investor.
So, before you take the plunge and buy an investment property, ask yourself:
- Do you have a real interest in the market?
Just because you watch the various home renovation shows on television doesn’t mean to say you necessarily have an interest in property. Ask yourself: Are you interested in researching the property market, understanding its cyclical nature and identifying which suburbs are performing better than others?
While you don’t need to be an expert in all things property-related, it definitely does help to have some awareness in terms of nearby growth areas and possible rental yields.
- Can you fund an investment property?
If you have an interest in property and would like to become a property investor, ask yourself whether or not you can afford to buy.
Do you have some savings locked away that you may be able to use as a deposit? Alternatively, have you built up equity in your current home that you may be able to use as a deposit?
If you’ve been living in your current home for an extended period, say 5 or 10 years, you may be able to unlock your existing property’s equity to invest.
What is home equity? Home equity is the difference between its value and the amount owed on it. In other words, if your home is worth $500,000 and you have $350,000 outstanding on your loan balance, your home equity would be $150,000.
Your home equity can increase by paying off your loan but it will also rise if your home has increased in value. If your existing property is in an area where homes are currently in high demand, it’s likely to be worth more now than when you first bought it.
This equity can be used to take out a second loan for an investment property.
It’s in your best interest to undertake a thorough home loan comparison between lenders to obtain the most affordable finance for your investment.
As a potential new property investor, it is important to research the various mortgage products available on the market, compare rates and see which home loan will best suit your needs.
Once you have sorted out your finances and determined how much you can afford, you will need to consider whether you should buy an apartment or a house. It’s a smart question that also needs to be carefully considered.
In a nutshell, plenty of industry experts and commentators have different thoughts on this matter, but at the end of the day, there really is no simple answer. It all comes down to the property itself, how much you can afford and its location.
If you do everything correctly and put in place a detailed investment strategy, investing in property can really help to increase your wealth and secure your financial freedom.
Remember, there are always tools on-hand to help you out – for a free home loan comparison, go to: www.helpmechoose.com.au
To read more handy tips that have the potential to save you money on health and life insurance and energy, read the HelpMeChoose blog: http://blog.helpmechoose.com.au/
*The information provided in this article is intended for an Australian audience. It should not be relied upon for the purposes of entering into any legal or financial commitments.