Australia provides loads of investment options, and real estate happens to be among the top choices. As appealing as it may be, though, investing in the Australian property market is not an easy undertaking. You can’t just decide to put money in a particular real estate development. Successful real estate investors put a lot of resources, tangible and intangible, into ensuring that everything turns out well. Never assume that making profits out of a real estate investment is easy or immediate. There are bound to be missteps along the way, especially if it is the first try. Understanding what it takes to get that property investment working for you is the first step to getting it right.
Granted that positive returns from a property investment are possible, even guaranteed at some point down the line, it still takes money to make money. Before you can start picking a piece of land to buy for development, ask yourself where you will find the funds and if they will be sufficient. Financing is one of the greatest hurdles in property investment developments. You don’t want your construction to stall halfway through the development due to lack of cash or failure to meet mortgage payments because your math was wrong. One result of poorly planned finances is selling a piece of investment real estate at an inopportune time.
- Borrowing Power
Firstly, know how much you can borrow. You may make assumptions about how much you expect to get from a lender only to find out later that your estimations are nowhere close to what is needed. To avoid disappointment, talk to lenders beforehand. Look at the loan options available for your type of investment. You have to consider your income and expenses when evaluating borrowing power.
- Selecting a Mortgage
Lenders offer a myriad of mortgage products, so you need to find the most suitable one. Should you take a variable or fixed rate loan? How much interest can you expect on the mortgage? Remember that the structure of your loan determines how well it serves you. You can use online calculators to learn about the cost of financing a mortgage, including purchase expenses and other fees such as loan establishment, conveyancing, and insurance. Once you have the numbers, you can effectively strategize your property development finance. A proper strategy should be made after considering the development management fee, equity access, and project scheduling.
- Clean up You Credit
When sourcing for funds, your credit history will factor in a large way. If you have pending debts, it is best to make payments before you go to a lender. Reducing your credit card limit is also an aspect that may work in your favor. Another fundamental is to avoid shopping for a property before pre-approval. You have to know how much cash flow will be available, and that means waiting for the loan pre-approval.
2. Picking the Property
One tip for real estate investors is that an investment is only as profitable as its value. You can’t put money in a low-quality commercial building and expect it to return meaningful profits. The investment options out there are quite varied; it seems impossible to pick just one. It can be particularly challenging to value the worth of a property, because it is not always clear. However, a few elements will help narrow down the choices.
First and foremost, pick a good location. Australia is a large place, and each city and town has something beneficial to offer. Select a place that resonates with the type of property investment you have in mind. For example, if you are investing in a commercial property, its location will have to be conducive for business. If it’s residential, the same applies. Location is a characteristic that dictates the value of real estate. A beachfront property, for instance, will cost more than one in a downtown area. Security has to be part of the filtering process as well. Areas with high levels of security are more appealing to prospective buyers or renters. Evaluate the accessibility of the location to infrastructure and services as well.
Another criterion to consider is the class of building you are buying. A property can be office spaces, houses, condominium units, commercial rental spaces, and so on. When making a decision, you should know the category of building that would best fit in with your investment goals. Take time to analyze the plus points and downsides of each form of investment.
3. Understand Market Trends
Numerous factors influence the property market and how it performs. Failure to understand the environment before putting in an investment can lead to massive losses. For instance, purchasing a building at the wrong time may cost more than if you had waited it out a while longer. Due diligence will take you very far when planning to enter the real estate business. The online platform has millions of resources and tools you can use to understand different market dynamics. There is no recipe for getting it right, but research will save you a lot of distress. If you know that there is a bill coming up that may influence the value of real estate in a certain location, it gives you a reason to look elsewhere.
Understand that the real estate sector has a lot of ups and downs, and it is hard to escape them all. What you can do is prepare enough for the property development process to minimize the risks. Becoming a property investor should be a well-contemplated decision. Invest in research and speak to professionals in the business, such as realtors, financial advisers, and lawyers. Expert insights will clear up misconceptions. Well-established investment objectives act as a blueprint when embarking on a project, so take some time to set them out.
About author: Riya is a writer from Australia. She holds a bachelor’s of Business Administration(Marketing). She is very delighted to work with aspiring small business owners. This time, Riya writes for MOVE – People Driven Banking. Apart from her marketing expertise, she always enjoys reading a good book, cooking, and traveling. Follow her on Twitter.