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Starting young: a guide for first time investors

With interest rates currently sitting at historically low levels and Australia’s lenders aggressively competing for business through sharp pricing and other mortgage incentives, now is a great time for potential property buyers to jump on the ladder.


With interest rates currently sitting at historically low levels and Australia's lenders aggressively competing for business through sharp pricing and other mortgage incentives, now is a great time for potential property buyers to jump on the ladder.

Of course, with property prices climbing at a pretty impressive rate across Australia, you could be feeling the pinch.

According to recent research from RP Data, capital city dwelling values jumped 4.2 per cent higher over the three months to the end of August – showing the strongest capital gain throughout the winter months since 2007.

Of the capitals, Sydney and Melbourne definitely lead the pack with growth in dwelling values, of 5.0 per cent for Sydney and 6.4 per cent growth in Melbourne over the three month period.

That growth has left the median dwelling price for Sydney siting at $650,000, while Melbourne boasts a median dwelling value of $523,750.

With numbers like this, it is fairly easy to understand why you might be having such trouble getting your foot onto the property ladder. While there is no denying it is getting harder for first home buyers to purchase property in the capital cities, it is not all doom and gloom.

While most first home buyers would ideally like to purchase property where they want to live, an increasing number of first time buyers are starting to look to purchasing investment properties before an owner-occupied property and buy where they can afford. And, with property prices showing no signs of slowing down, this could be a very smart move for you.

Buying where you can afford and continuing to rent where you want to live not only allows you to put your foot on the property ladder, but it allows you to own an asset that will continue to grow in value.

So, what can you do if you are considering purchasing an investment property do to ensure your decision is the right one for now and the future?

  • Do your due diligence: Before you make any investment decisions, it definitely pays to do your research. Find out which areas are offering the greatest yields and rental returns. Researching the property market will help you to identify which areas are performing better than others and which areas offer good investment potential
  • Know what you want: After you have researched the market, consider what you want from your investment property. Do you want it to grow in value rapidly, or would you like a strong rental return? Knowing what you want from your investment property will help you to identify which suburbs you could potentially purchase in.
  • Think about the future: As the old adage goes: “when you fail to plan, you plan to fail” and this couldn't be truer when it comes to property investment. Many people make the error of believing property investment will make them millionaires overnight. This is simply not the case. To make money from property investment you need to be in it for the long haul. Create a long term wealth/property investment strategy and stick to it.
  • Make logical decisions: When it comes time to buying an investment property, don't just opt for a property that you would love to live in. Think about your target market. Do you plan to rent your property out to a single person, a couple or even a family? Once you have worked out your target market, think about whether your property would appeal to them. Is it close to transport, shops, schools and hospitals? Is there parking on or off street? The key is to think logically and clearly when purchasing an investment property.
  • Seek professional advice: Before you go ahead with a property purchase it pays to speak with a finance professional like a mortgage broker. A mortgage broker is a local property market expert – so they can help you identify which areas are offering the best yields and rental returns. In addition, they can help you to finance your loan and ensure it is structured in the right way for your needs – both now and into the future.  

So while home loan interest rates are at record lows and banks are competiting for customers with discounts, now could be the ideal time to contact your Mortgage Choice broker on 13 77 62 to plan and discuss your options for investing in property. 

You can also read our comprehesive guides to property investment at www.mortgagechoice.com.au

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