Property investment 101: Your go to guide before getting started

Property investment 101 will demystify property investment for you! So before you get started buying, make sure you take a few minutes to finish reading!

Let’s demystify property investment for you!

Property investment simply refers to the act of purchasing real estate – whether residential, commercial, industrial or mixed use – with the goal of generating a profit through rental income, appreciation in value upon the future sale of the property, or both. Sounds easy, right?

So can I invest in property?

Individual investors, a group of investors, a business or corporation and other legal entities can all own property:

Individuals Any person who is legally recognised as an adult can own property in their name…but in our opinion, the earlier you start, the better!

Joint owners Multiple individuals can own a property together, such as a married couple who own a house to rent out, or business partners who get together to develop a property or site to increase its value.

Trusts Trusts can own property on behalf of beneficiaries, such as a group of designated family members.

Corporations Companies can own property in their name, either as an investment or for business purposes.

Should I think short term or long term when investing in property?

Well, it all depends on your own personal goals and timeline.

In the long term it can be a lucrative investment strategy, especially in areas where property values are expected to appreciate or where rental demand is high.

When it comes to the short term, some investors employ a strategy know as ‘flipping’, which involves purchasing a property, remodelling or renovating it, and then selling it for a profit in a much shorter timeframe. This type of strategy tends to get a lot more media attention than the tried and true ‘buy and hold’ strategy.

Why should I invest in property instead of shares?

With the right investment strategy and advice, property has the potential for capital growth, which refers to the value of a property increasing over time. Pair this with the steady income that a rented investment property can provide, and the potential tax benefits, and this makes property investment an attractive and very viable method to build wealth.

In addition, property is typically considered a safe investment because the property market tends to be less volatile than investing in stock and shares.

However investing in property boasts a host of desirable features that distinguish it from other types of investment! Here’s a few more:

Tangible asset You are literally investing in rock solid bricks and mortar! Property investment provides you with a tangible asset that you can see and touch (and drive by if you’re really keen), unlike shares or bonds, which are intangible assets.

Regular income One of the most significant benefits of investing in property is its potential to earn regular rental income, providing a steady and demonstrable cashflow for the property owner.

Appreciation in value Property values generally appreciate over time resulting in healthy capital gains, especially over the long term or in areas with high demand and/or limited supply.

Tax benefits Property owners can take advantage of a number of tax benefits, including deductions for expenses, interest deductions, capital gains tax discounts, not to mention negative gearing and depreciation… this is where obtaining targeted advice can really pay off!

Control Property investors have a certain level of control over their investment, including the ability to make improvements and renovations to increase the value of the property.

Inflation hedge Property investment can act as a hedge against inflation, as rents and/or property values tend to increase during periods of inflation.

Diversification Finally, investing in property is an effective way to safely diversify your investment portfolio, reducing overall risk by spreading investments across different asset classes.

You’ve sold me on the good points, so what are the downsides to investing in property?

While it might seem easy enough to browse the listings, pick up a property and start raking in the rent (and if you do it right then property can be a relatively straight forward ‘set and forget’ strategy), however there are some key points to consider before you start investing in property.

Liquidity You can sell shares at a moment’s notice, however property can have a longer turnaround time when it’s time to sell. Luckily, buying in the right location in the first place can eliminate this risk.

Entry cost You can buy shares at the drop of a hat and for as little as $100. Often, this type of investing (without knowledge and understanding) is just speculation and relies largely on luck if you’re not closely monitoring your share portfolio. Property is more accessible to the average Australian, but also a bigger ticket item, and correspondingly will cost you more time and money to enter the market.

Managing the mortgage Sudden changes like rental vacancies or rising interest rates can impact your cash flow. Again, selecting a property in a desirable location with low vacancy rates can mitigate this risk, and a good accountant and financial planner can help keep you on top of your finances.

You don’t know what you don’t know Make sure you obtain appropriate building and pest inspections before buying, scrutinise rental applications so you have easy to manage tenants in place and that the property is well maintained to minimise issues. Again, buying the right property in the first place, and engaging the right professionals as required will make your investment much easier to manage over the long term!

How do I best invest in property?

If you’re doing it on your own, successfully investing in property involves a significant amount of time, effort and money. Here are the general steps you should follow to get the very best results:

Set your goals Consider why you’re investing in property in the first place – is it to generate regular rental income, to maximise capital appreciation, are you relying on it to generate income in retirement…if yes, how much, and when!

Choose the right property Once you have your goals, you need to choose the type of property that best fits those goals. Commercial or residential? Townhouse, apartment, off the plan, house and land package?

Research, research, research Know the state of the property market in gerneral, the location, the properties available in that location, property values, local regulations, rental demand, vacancy rates, what tenants are seeking. If you need expert advice, don’t be afraid to ask!

Secure financing Unless you have significant cash reserves you’ll need to secure financing to purchase the property. Again, this is where obtaining the right advice sooner rather than later pays off.

Make the purchase This is where keeping an open and objective mind will help you to secure the right property, at the right price, and under the right terms and conditions. Nobody wants to pay too much for the wrong property!

Manage the maintenance If you plan to rent out the property, you need to manage the property. DIY can seem like an attractive proposition, until you consider the time and effort involved in being available to solve any problem at any time! Not to mention making sure that you’re finding the best tenants and maximising the rental return while minimising vacancies.

Monitor and adjust You need to monitor your goals and your investments over time, then make adjustments as needed. This may include making improvements to the property to increase its value or adjusting rental rates to reflect changes in the market.

How can One Haven help?

Here at One Haven our priority is to help investors throughout the entire process, so the complete experience is stress free. We make sure that your investment is painstakingly researched (so you don’t need to) and meets our exacting standards.

We can do this not just because we know the property market, but because of our extensive contacts in the property and financial services industry. This means we’re perfectly placed to help clients safely build their portfolios and grow and protect their long term wealth through property.

So if you’re keen to further your property journey, then reach out to Hamish McIntosh, One Haven’s Head of Property and very approachable expert in all things property!