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HOW TO INVEST: THE FIRST STEPS IN PROPERTY INVESTMENT



Choosing to invest in property is a big decision however it shouldn’t be a daunting one. It is important to ensure that you understand the steps involved and engage professionals to guide you through the process.


A large percentage of Australian's own property, however only 9% of people own an investment property, which equates to approximately 2.2 million people [1].

Many Australian's don't take the first step towards purchasing an investment property as they believe it's unaffordable and completely out of reach.


According to the Australian Taxation Office, 39% of all people with an investment property earn less than $50,000 p.a and 73% earn less than $100,000 p.a. in their regular day jobs [1].


Step 1. Your Goals.

Knowing your property investment goals and setting targets is an important aspect of investing in property:

  • Are you looking to have a passive income in the future?

  • Do you want to use the investment property as a vessel to create capital to pay off your own home?

  • Do you want to own one investment property or develop a portfolio of 10?


Each person's goals will be different, and many factors will come into play when setting expectations. Expectations may include:

  • When you want to retire;

  • How much income you will need to retire;

  • What is achievable on your current salary


Step 2. Know Your Finances.

The next step is understanding your financial capacity and if the goals you have set are possible now, or what needs to change, financially, to make them feasible in the future.


An investment property can be purchased outright using cash or more commonly purchased using a loan, known as a mortgage. If you like many other Australian's will be using a mortgage to service the repayments for the investment property, you will need to work out your borrowing capacity from the bank.


Yes, there are many online calculators available, however to get an accurate borrowing capacity figure that takes into consideration your goals and objectives, we recommend speaking with your Mortgage Broker. They will also able to organise a pre-approval, this is an indicative approval on the amount you can borrow. This will provide you with a price range of affordability based on your financial position.


It is at this stage, once the pre-approval is known, that you review the goals you initially set to figure out if your strategy needs to change and if so, how.


Step 3. Find The Right Market and Property.

Once you have your finances in order and you understand what you are hoping to achieve then you will need to start looking for the right investment property.


This step is crucial in ensuring you have the best chance at achieving capital growth and strong rental yields for the investment property.


It is important to understand the underlying fundamentals that determine property growth, from a macro and micro level.


At Meridian Australia, we use unbiased data from our Investor Panel of economists to target residential property markets where there is the best potential for strong capital growth and rental yields.


This will ensure you are choosing the right property, in the right market and at the right time.

Selecting the right first property is vital as this will be the base of your property portfolio.


Data from the ATO shows that a large 71% of investors in the property market only hold one property, and only 10% of hold more than two [1].

This comes down to many factors, however it is usually because the wrong property was selected, which didn’t allow the purchaser to continue building their portfolio, either due to little to no capital growth or poor rental yields.


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Next Steps


Looking to get the property investment conversation started?

Book your Property Investment Strategy Call with us today here.


Or, just looking to stay in the loop?

To stay up-to-date make sure you join our Property Market Pulse Newsletter here.



Tim Davis – Property Investment Consultant


P: (02) 9939 3249

E: [email protected]

W: www.meridianaustralia.com.au


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Disclaimer: When considering purchasing a property, it's always prudent to seek the advice of an appropriately qualified professional to determine which strategy is most appropriate for your circumstance.


References

[1] Australian Taxation Office