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LOOKING TO INVEST?

7 Oct 2014 bathurst 0 Comment

The record number of investors piling into the housing market shows no signs of letting up this spring, as the favourable conditions that attracted them – strong prices growth and rock-bottom interest rates – look set to continue for some time.

In fact,  their numbers only look to be increasing. The latest Australian Bureau of Statistics’ figures on housing finance out this month showed investment finance increased in July by 6.8 per cent.

Their numbers are now pushing towards 60 per cent of all housing loans taken out in NSW, something that is unprecedented, says Domain Group’s  senior economist Dr Andrew Wilson. “Vacancy rates are still low, price growth is the strongest of the last decade, and investors are chasing that capital growth rather than yield as rents can’t rise as fast as prices.”

So with more of us thinking of becoming a landlord, here are some tips about making a sound purchase this spring.

1. Go for property price growth, rather than rental yields. “While rental returns help pay the mortgage, it’s really capital growth that gets you out of the rat race,” says Michael Yardney of Metropole Property Strategists.

2. Too many people limit themselves to just their own suburb or the areas they know well, believes property author and adviser Margaret Lomas. “But you should do your research so you can try to find what will be the next hot spot.”

3. Try to buy in a great location in an established suburb, with infrastructure and within walking distance of local shops and public transport, advises David Johnston, managing director of Property Planning Australia. “And think about buying as close to the CBD as you can afford.”

4. If you’re going for an apartment, an older one in a smaller block on a bit of land will generally be a good investment as it’ll have lower running costs, says Johnston. If you’re looking at a new apartment in a big complex, make sure there’s something special about it that marks it out from the rest.

5. Don’t fall in love with a particular house or unit, warns Lomas. Go for the area first, and the property last.

6. Pick something that will be in continuous strong demand by owner-occupiers, because they’re the ones who push up property values, says Yardney. That means a level of scarcity, maybe something you can improve through renovations or development or maybe an apartment or townhouse as an increasing number of people love that lifestyle.

7. If you go for professional advice, make sure the person advising you isn’t someone getting a kick-back for selling you a particular property, says Johnston.

8. Don’t mix up your objectives. Don’t buy a place in Noosa you want for occasional holidays. “That’s almost always not the right investment,” Lomas says. “Buy a property to rent out, and rent someone else’s weekender for your holiday.”

9. Don’t focus on bargains, says Yardney. “You make your money not by buying cheaply but by buying the right property. In today’s sellers’ market, don’t look for bargains; you won’t find them.”

10. Most people buy a single investment property and then stop, says Lomas. But you should have a solid portfolio of investment properties in diversified areas to create an income and growth.

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