A recent survey conducted by Mortgage Choice has found that more than one quarter (26%) of Australian homeowners are considering buying an investment property, with 56% of these saying they intend to buy their investment property in the next two years.
The findings are a welcome sign that Australians are beginning to feel confident enough to take advantage of the current low interest rates, and are considering making a significant investment in property in the near future.
The Survey also revealed that Australians’ love affair with bricks and mortar shows no sign of dwindling. Of the 25% of respondents who already own an investment property, 68% own one property, 19% own two, and 13% own three or more properties.
There was a close race at the top when respondents were asked about their five most sought after aspects of an investment property. 66% of respondents said that their focus was tenant demand in the area, and almost the same number – 65% – said they wanted an investment property in the right suburb and street.
Rounding out the top five factors buyers look for in an investment property was the locality in relation to amenities and entertainment (53%), population growth in the area (46%) and infrastructure going into the area (44%).
By far the most preferred investment strategy (59%) for respondents was to buy an average property in an up and coming area and to hold onto the property. Hopefully these survey findings go a little way with helping locals with making decisions about their property investment plans.
Keep in mind that understanding your financial goals and deciding on the right strategy to achieve them is key when making any investment decision, including property investment.
For those considering investing in property in the near future, following is a list of considerations when mapping out your property investment strategy:
- Be realistic about capital gain and rental income – Are your expectations around how much rental income your property will generate realistic to current market trends? Research rents in the local area and factor this into your purchase price and loan amount.
- Consider using the equity to purchase an investment property – If you already own property, you may be able to use equity in to buy another one. You can do this by selling a property for more than what you owe on it and using the funds as a deposit or by applying for a home loan against the existing property, using your equity as a deposit.
- Carefully weigh up positive vs. negative gearing – Consult with your financial adviser to find out whether positively or negatively gearing a property is of greater benefit to your overall financial position. Investigate the tax and legal implications associated with property investment by talking to a financial planner, accountant or solicitor.
- Choosing the right finance – Get the right finance organised early in the plan, or at least get pre-approval, so you know how much you have to play with. A reputable mortgage broker or lender can help you find a loan for your individual circumstances.
- Consider interest only vs. principal and interest loans – Although interest-only loans will not reduce the loan amount, monthly repayments will be lower. This will enable you to make greater contributions to your principal place of residence while the investment property grows in value through capital gains.