Philosophy of Property Investing
Safely accumulating wealth through property investment requires strategy, careful investment and patience.
Capital Growth Property is focused on providing knowledge to assist its clients safely through the purchasing process.
This educational guide will address the principles and procedures needed to understand property investment whilst providing a simplified over view of the process for purchasing an investment property.
Finding an Investment Property
Property values commonly have at least doubled in every decade over the last fifty years.
Residential property is an asset for those with a mid to long-term investment strategy. The residential property cycle is generally a period of 7-10 years and as a property investor you should have a specific aim of creating a positive cash flow from your investment property within that period.
Investing in property means that you start with what’s right for you, this could mean that your initial purchase is an entry level, tenanted townhouse used as a stepping stone to accumulating wealth so that you can ultimately buy your dream home.
Additionally, investing in real estate will give you the access to the benefits of capital growth as well as the tax advantages associated with negative gearing.
Property can also be less volatile than some alternate investment strategies and tends to be considered a safe haven for investors when other assets do not perform.
Property investors of ten look forward to an earlier or wealthier retirement and it is never too late to begin. Whichever stage in life your are in, property has both the flexibility and wealth-building power to provide a rewarding and secure retirement.
Finding an Investment Property
In selecting an investment property it is critical that you follow a strict due diligence process to ensure an effective investment strategy. Condensed from a detailed check list, investigations must include research into the following:
- Location – Look at where people want to rent that is well located to surrounding infrastructure and facilities
- Value for Money – Buy at or below current market value. Review a current bank valuation.
- Infrastructure – Investigate current and planned infrastructure
- Rental Return – Minimum of a 4% yield
- Design and Finishes – Consider whether design and finishes meet the tenants demand
- Quality and Integrity of Developer – Investigate past projects
Financing Your Property Investment
In order to be able to focus on deciding if a given property is a good investment you need to make certain that your resource base (your financial assets and knowledge) is adequate. It is a necessity to have clearly defined
- The borrowing capacity of debt you can afford
- The financial institution you will partner with
- The finance pre-approval required
- Any supplementary advice from professionals such as your Lawyer and Accountant
Establishing this information will ensure that your energies will be focused on choosing the right property for your portfolio.
It is easy for investors to achieve capital growth and good cash-flows from an investment property in any given market or point in time, the real question is, ‘ Where does that property need to be and at what price should it be purchased for today?’
Times are changing and much consideration must go into choosing the cities and suburbs that you may buy into. Look at the characteristics of suburbs that have achieved well in the past and seek out these characteristics in suburbs that have been largely unnoticed.
Research suburbs that are close to local facilities and have enough current or projected infrastructure to support future growth. A low vacancy rate means the area is attractive to renters, and this combined with a limited supply of proper ties should make certain that demand remains strong. A history of strong capital growth can also be a good predictor for the future.