For most, investing in property is an uncertain and overwhelming process. Amidst all the talk of rate rises, property value plateaus and insufficient rental demands, it seems that much can go wrong. In reality, however, clever property investment can be a fantastic means of accruing wealth and attaining long-term financial security. It is certainly not worth letting your “fears” obstruct your property goals! Here are some practical steps to allay common investment anxieties.
Interest Rate Rises
Interest rate rises are certainly a factor that you need to consider when investing in property. The unpredictability of interest rates can engender fear in a first-time investor and, for some, even an incremental rate-rise would threaten ‘mortgage stress’. Firstly, it is always a good idea to leave a monetary buffer in-place. Your financial circumstances should be flexible enough to accommodate rate-increases. If they are not, it may be an indication that you have overextended yourself financially and have opted for an unsustainable loan. Regardless, if the variability of interest rates is a source of anxiety for you, there is an easy fix: fixed rates. Opting to secure the interest rates on your loan will provide you with at least five years of certainty on your repayments. This should allay the stress of uncertainty around mortgage payments and help you to better prepare for each instalment.
Investment can be an overwhelming process and paying too much for a property is a common fear for potential buyers. This anxiety can be easily resolved by thorough research of, and familiarity with, your local market. The process of ‘getting to know’ an area will include inspecting at least fifty properties, consulting agents and attending multiple auctions. It is also advisable to examine the sales history in your area of interest. This should give you a good insight into local house values, and how much your property is really worth.
Minimal Capital Growth
When investing in property, many potential investors are concerned that they are buying in a suburb without any potential for capital growth. This fear can be easily allayed by conducting the research necessary to identify a growth suburb. Property sales reports (which can be accessed online or via real-estate agencies) will provide an idea of suburb price growth using yearly comparisons. The trick is to track the market and invest in a suburb that has not yet peaked but is showing promising signs of growth. High rental demand and few properties being ‘passed in’ at auction are both signs of a promising suburb. Infrastructure also drives growth. When researching a suburb, it is crucial to check out the local council’s website for any planned developments. Certain projects might improve the future demand for housing in an area, including transport upgrades, public amenities (pools, playgrounds, parks) and schools. It is also useful to consider the impact of potential residential developments in the area, as these could potentially dilute the capital growth of your investment.
Lack of rental interest can be an issue for some landlords and is an off-putting concept for potential investors. Again, research is key to allaying this fear. Speak to local realtors about the vacancy rates in the locality and what kind of rental property is in demand. Hiring a good property manager is also key to securing a well-managed lease. If you do find yourself struggling with rental-demand, these experts will help incentivise your property. For example, they might consider detracting ten dollars a week or waving the first two weeks of rent.
We have all heard the horror stories of tenants trashing rental properties. While this is an unattractive prospect, it is rarely an actuality and should not deter you from investing. There are many ways to mitigate the risk of property damage. Ensure that you conduct a stringent application process to qualify your tenants, ask for rental references from past landlords, have your tenants pay an up-front bond and opt for low-cost land-lord insurance.
Investing in property doesn’t have to be a daunting process! Get in touch with us on 1800 184 284 or book a call for free, expert advice.