Around 2.2 million Australians own investment properties, which accounts for approximately 8.4% of the population. However, the number of people entering the property market is gradually declining. If you are looking for a successful foray into property investing, then partnering with a buyer’s agent can provide valuable insights and support. In this guide, we will explore how to navigate the property landscape, the benefits of working with a buyers agent, and what to look for in your first investment.
How Property Investing Works
Property investing is often seen as a stable and lower-risk alternative to other investments like stocks. A well-diversified portfolio that includes real estate can help mitigate risk. According to Vanguard’s 2023 Index Chart, Australian real estate values have experienced an annual growth rate of 7.3% since 1993. Despite this encouraging statistic, the profitability of property investments depends heavily on various factors, including location and property quality.
For those considering an investment property, the primary goal is to generate profit either in the short or long term. It is crucial to approach property purchases with a logical mindset rather than emotional attachments, especially when collaborating with a buyers agent who can offer objective advice.
What to Look for When Buying Your First Property
Purchasing your first home can be an emotional rollercoaster, making it difficult to separate what you desire from what you can afford. Typically, first-time buyers gravitate towards lower-end market properties, often overlooking potential bargains. To make a wise purchase, consider the following:
- Budget: ensure the property aligns with your financial capacity
- Location: look for suburbs that suit your lifestyle and investment goals
- Amenities: proximity to schools, shops, and public transport can significantly affect your property’s long-term value
A buyer’s agent can help identify properties that fit these criteria while providing insights into the surrounding area. Interactive tools such as maps can help assess various aspects, from property boundaries to local amenities.
Assessing Property Condition
Before committing to a purchase, it’s wise to have a professional evaluate the property. Key areas to inspect include:
- Water stains, corrosion, and mould
- Structural integrity, including ceilings and walls
- External elements like roof lines and gutters
- Plumbing and drainage systems
- Pests or insect infestations
- Environmental risks such as flooding or fire hazards
Identifying these factors early on can save you from costly repairs in the future. While some issues may be cosmetic and easy to fix, structural problems may require substantial investment.
New Building vs. Established Property
Deciding whether to buy a new build or an established property depends on your preferences and available incentives.
Buying and Building a New Property
New properties come with various advantages, including:
- Incentives: government grants, such as the First Home Owner Grant (FHOG), can provide significant financial assistance, particularly for new builds. In Western Australia, first-home buyers can receive up to $10,000.
- Customisation: Building allows you to tailor the property to your exact specifications.
- Lower Maintenance Costs: New properties are generally easier to maintain and often come with warranties for any defects.
However, the construction process can be lengthy and subject to delays.
Buying Established Properties
Established homes offer several benefits:
- Location: These properties are often closer to the CBD and have well-developed amenities, providing better investment potential.
- Immediate Occupancy: You can see what you’re getting and move in faster compared to new builds.
- Potential for Renovation: Many established properties sit on larger blocks, offering opportunities for future development or renovations.
A buyer agent can help evaluate the potential of established properties, especially those needing work, allowing you to maximise your investment.
Sorting Out Your Finances
Before diving into property investment, getting your finances in order is crucial. Here’s how to navigate this complex process:
Understand Your Deposit
The deposit is your initial contribution towards the property. Generally, you’ll need 5-20% of the purchase price. The larger your deposit, the less you have to borrow, making it easier to cover additional costs associated with home ownership.
Lenders Mortgage Insurance (LMI)
If your deposit is less than 20%, expect to pay Lenders Mortgage Insurance, which protects the lender if you default on your loan. While this adds to your costs, it allows you to enter the property market sooner.
Exploring Grants and Guarantors
If you struggle to save enough for a deposit, consider having a guarantor, such as a family member, to support your application. Additionally, explore government grants available for first-home buyers, which can significantly ease your financial burden.
Getting Pre-Approval
Once you’ve chosen a lender, seek mortgage pre-approval. This process confirms how much you can borrow, making shopping for properties within your budget easier. It typically lasts 3-6 months and gives you a solid understanding of your financial parameters.
Start Shopping for a House
With pre-approval secure, it’s time to hit the market. Keep your must-have list handy and don’t be afraid to explore various properties. Remember, especially for first-time buyers you may need to compromise on certain features.
By partnering with a knowledgeable buyers agent, you can streamline this process, making informed decisions that align with your investment goals. Their expertise can help you navigate the complexities of property investing, ensuring you secure the best possible deal.
To Sum it Up
In conclusion, property investment can be a lucrative venture if approached wisely. By enlisting the help of a buyer’s agent, you’ll have the support needed to make informed decisions and ultimately achieve your financial goals.