With sharemarket gyrations occurring on a weekly basis at the moment, and the world trying to take stock of what may still prove to be a trade war between its two biggest economies, property investing looks like an increasingly sweeter and more stable proposition than stocks and bonds.
If you look back on momentous events like Covid, the GFC and even the Asian Financial Crisis, property values tend to rise or remain stable while sharemarkets bounce around.
It’s not always an easy decision to prioritise property investment. Climate concerns and our recent history of catastrophic fires and droughts are reasons investors do not take the real estate market for granted.
However, this is not a sufficient reason to ignore the opportunity to build wealth through capital growth (the increasing value of building and land), and income from record-high rents and tax incentives.
If you’re thinking of buying an investment property, or growing your current portfolio, it remains vital to plan your investments strategically.
Right now, price trends suggest there are good opportunities in most capital cities, but especially Melbourne, which has experienced a two-year hiatus but is now showing the first signs of recovery.
Investment in a market that has shown a good track record of growth is probably a better bet than speculating on a boom town. For example, prices in Perth have risen 137% in the past five years, but few people expect such a level of capital growth to continue.
Investing in property in Australia as a first-time investor can be a rewarding journey, but it requires careful planning and a solid understanding of the market. Here are six essential tips to help you get started:
Goals and strategy – As an investor, you need to prioritise the potential outcomes. Are you seeking capital growth, profit from rent, or a balance of these elements?
Profit or loss? – Many investors will seek to create a situation where their investment makes a slight loss so they can offset this negative result against expenses, such as insurance, maintenance and property management. But there’s nothing wrong with making a profit, either!
Risk tolerance – Every investment comes with a level of uncertainty. You need to assess your risk tolerance when deciding how much to spend, choosing potential areas in which to invest, and the type of property most suitable for rental.
Tax and depreciation – This is a complicated area, and while many people will tell you to educate yourself on such matters, you should use the services of a qualified financial adviser or accountant. The rules are changing all the time in every state. There has been upheaval in Victoria in the last couple of years, and NSW revamped its rules only last month.
Landlord or investor? – If you choose to be a landlord, you’ll have to find and choose your own tenants, set the rental price and maintain the property. Alternatively, you can use a property manager, who typically charges around 7% of the annual income. They will oversee all aspects of your investment for you.
*NOTE: The information in this article is general in nature and provided as a market overview only. Always consult your financial advisor or accountant for advice specific to your personal circumstances.