Your Complete Guide To Property Investment

When most people think of investing, they think of stocks and shares. But did you know that there are many other types of investments available? One such type is property investment. Property investment can be a great way to make money and build wealth over time.

Are you interested in property investment but don't know where to start? This guide will provide you with all the information you need to get started. We'll cover everything from what types of properties are worth investing into how to find the best deals and manage your portfolio. So whether you're a beginner or an experienced investor, read on for some valuable tips!

Whether you're a seasoned investor or just starting, property investment can be a great way to secure your financial future. But it's important to know what you're getting into and have a plan in place. In this guide, we'll walk you through property investment basics, from choosing the right property to affording it and everything in between.

So what are you waiting for? Start reading!

Is It Too Late? Have I Missed The Boat?

At this very time, a great deal of emotion can be felt, can't it?

Fear of missing out, also known as FOMO, is a prevalent concept in Australia's real estate markets.

Clearance rates at auctions continue to be quite high, prices are still going up, and supplies are still very limited.

And we are being used as pawns by the media, who are inciting a frenzy with sensationalist stories, which is prompting some prospective homeowners to be concerned that the property market is moving too quickly for them to catch up to. On the other hand, they frighten other people by predicting that interest rates are set to rise, which will cause stress on mortgages and may ultimately lead to a slowdown or possibly a crash in the market.

Some investors are concerned that it is too late to enter the property market because of the significant rise that several regions have had over the course of the previous year.

The fact that we react to these headlines is, of course, nothing out of the ordinary.

After all, we are human, and it is natural for us to have the desire or aspiration to buy our first home, enhance the home we already own, or start climbing the property investment ladder.

Given the constant barrage of property-related news that we are subjected to via the media, it is difficult to avoid becoming emotionally invested in the current situation.

Even though feelings have their place in day-to-day interactions, they have no business being involved in financial decisions.

The short answer is no, it is not too late to change your mind.

Purchasing a home 10, 15, or 20 years ago certainly seems like it would have been the best option.

And certainly, it would have been wonderful to purchase a home a year ago, at the beginning of the current cycle, when prices were much lower. However, it is expected that the value of well-located houses will continue to rise over the next several years, albeit not at the same frenetic growth rate as was observed over the course of the previous year.

Bear in mind that there is no such thing as an "Australian property market," and even within each state there are multiple markets that are differentiated by geography, the type of property available, the price range, and other factors. Having said that, I'll explain in this in-depth article what our research suggests is in store for the housing market in Australia.

There is a widespread agreement among all of the bank economists that property values will increase by between 6 and 8 percent throughout the course of 2022. Nevertheless, eventually this cycle will be slowed down by either rising interest rates or action by APRA in 2023 or 2024. This will happen in the year 2023 or 2024.

Benefits and Drawbacks of Investment Property

When weighed against other avenues of wealth accumulation, real estate investing stands out as a choice that is both reliable and effective.

1. Benefits

• During the past 20 years, the return on investment for residential property has been significantly higher than that of any other type of investment, including shares of stock.

• Control:  Because you have direct control over the returns, purchasing property may be a very lucrative investment. You are able to manage your own assets, which is one of the primary advantages, as opposed to handing over decision-making authority to a large company or a fund manager.

This indicates that you have the ability to make improvements to your existing property or purchase a property with a twist that will give you significant development in your investment.

If the profits on your investment property are not meeting your expectations, you might increase its worth by making improvements or purchasing new furniture that makes it more appealing to prospective renters. To put it another way, you have the ability to have a direct impact on your return by taking an interest in your property, gaining an awareness of the requirements of potential tenants, and satisfying those requirements.

• Leverage is one of the unique aspects of the property, and one of the reasons for this is that banks are willing to lend you up to 80% of the value of the property. This allows you to utilise the money of other people to purchase larger amounts of your investment.

• Tax advantages: Investing in real estate can provide significant tax advantages, such as the ability to depreciate property over time and, in some circumstances, the ability to claim a loss on your taxes.

• Bricks-and-mortar stability, as many people like to say, may be found in residential real estate, according to a common saying. This indicates that homes do not "go bankrupt" in the same way that firms and shares do.

This is partially attributable to the size of the residential market as well as the fact that slightly less than 70 percent of the people who own properties are not investors but rather owner-occupiers. As a consequence of this, the residential market is the sole investment sector that is not dominated by investors; as a result, it offers an inherent protection mechanism.

• Income: The rental income that you earn from your property enables you to borrow money and enjoy the benefits of leverage by assisting you in paying the interest that is accrued on your mortgage.

• Properties have a forgiving nature. Even if you purchased the worst property at the worst possible time, the value of the property would still increase over the course of the following years. Real estate has a long track record of proving itself to be one of the most resilient investments. It is likely that the value of an investment property will increase over the course of several years if you are willing to keep it.

• There are a variety of risks that can be insured against. In addition to building insurance, astute investors get landlords' insurance to safeguard their financial interests.

2. Drawbacks

There are some drawbacks involved with investing in real estate, despite the fact that property investments may seem like nothing but sunshine and rainbows.

• High entry costs: Because of the persistent upward trend in property prices, it is progressively getting more and harder to get into the market. Because of the high entry charges, a significant number of potential investors choose not to participate, and it is challenging to get started if one does not have a regular savings routine and some money already in the bank.

• Lack of diversification: It is customary for novice investors to put all of their money into a single investment opportunity because the barriers to entry are so high.

This lack of diversity presents a danger, particularly in the event that the market undergoes a sudden shift or your investment does not perform as anticipated. The obvious solution to this problem is to acquire the appropriate kind of real estate, which is property that does not experience major shifts in value when there is a shift in market conditions. (In just a moment, I'll go into more depth on this.)

• Ongoing and additional costs: Investing in real estate comes with a variety of recurring expenses, including insurance premiums, property taxes, monthly mortgage payments, upkeep and repairs, and so on. These costs could be recurring or they could appear out of the blue when you were not expecting them at all.

If you also own a high-growth property, the rental income from that property will most likely not be sufficient to pay all of your costs during the first few years of ownership. Therefore, while a lot of investors make up for this negative cash flow with their savings, clever investors build up cash flow buffers like a line of credit or offset account to cover their negative gearing. This allows them to avoid having to use their savings.

• Tenant Problems: Even if you hire the best property managers to take care of your property, you may still experience tenant problems or periods of rental vacancy. This can be detrimental to your finances if you do not have protection in the form of landlord insurance or cash flow buffers, so be sure to protect yourself.

• Real estate is illiquid and lumpy, meaning that it takes time to sell and you cannot quickly sell off a portion of the house in order to turn that portion into cash.

• Surprises are something that always seem to sneak up on investors, and they can take the form of anything from fluctuating interest rates to unforeseen maintenance.

Why Should You Invest In Property As Opposed To Other Asset Classes?

Even though it's been said that you shouldn't put all of your eggs in one basket, many people in Australia choose to put their money into real estate as an investment because of the various benefits it offers over other asset classes.

When compared to the real estate market, the stock market is widely seen as a more risky and uncertain investment option due to its potential for higher long-term returns.

As a result, it doesn't sit well with people who aren't willing to take many risks, particularly those who have little knowledge of how the stock market operates.

Studying the stock market is not a substitute for having the specialised knowledge necessary to invest successfully and profitably in the stock market.

This could end up being quite expensive. On the other hand, real estate is an asset type that tends to be more stable than the stock market, which can result in significant losses in a single day.

Putting money into savings accounts with a term deposit carries a low level of risk but produces modest returns.

One of the major advantages of investing in residential real estate is that the market is dominated by non-investors (homeowners), who do not think like investors, and bring stability to residential real estate price trends. This is one of the major benefits of investing in residential real estate.

The Five Ways to Profit from Property Investment

The most important thing is to have experience in real estate investing. You can generate money off of real estate in one of these four ways, and if you find the appropriate combination of these strategies, you'll be able to turn real estate into cash.

They are;

• Growth of Capital: In order to construct a solid asset foundation for yourself, the value of your assets will need to appreciate at rates that create wealth (in other words, above-average capital growth.) This will be the result of high demand from both owner-occupants, who are responsible for driving up property values, and renters (who help you pay your mortgage.)

• In other words, your rent is considered your cash flow.

• Tax advantages: Despite the fact that you should never invest only for this purpose, a proper tax strategy can assist you in managing your cash flow, reducing your tax responsibilities, and improving your bottom line.

• Accelerated Growth: A wonderful strategy to create capital growth is to buy a property that needs some cosmetic TLC through renovations or a significant facelift through property development.

• Property investors have learnt the hard way that it is too difficult to make money using their own money as a result of inflation. Instead, they have acquired the ability to leverage and gear the financial resources of third parties. To put it another way, they sign a mortgage agreement.

On the other hand, inflation eats away at the value of the mortgage over time. For instance, if you take out a mortgage of $400,000 on a house that is currently worth $500,000, after ten years, the value of your property may have increased to $1 million, but you will still be responsible for paying a mortgage of $400,000. (assuming interest-only payments). In spite of this, your $400,000 will be worth significantly less in ten years as a result of inflation.

Employ a Reliable Property Manager and Sit Back

Property managers are typically licenced real estate agents who are experts in their industry; it is their responsibility to maintain everything in order for both you and your renter. If you decide to hire a property manager, make sure to ask for references.

They can provide you with continuing guidance, assist you in managing your tenants, and obtain the best potential value from your property; the right agency will let you know when it is appropriate to review rents and when it is not appropriate to do so.

The property manager should be able to provide guidance on all aspects of real estate law, including your rights and obligations as a landlord as well as the tenant's rights and responsibilities. They will also cover any maintenance difficulties; however, you are needed to give prior approval for any charges that are incurred (with the exception of some emergency repairs).

The property manager will also assist you in finding the ideal renter for your rental home, as well as verify their references and ensure that they pay their rent on time. It is vital that you do not meddle too much with tenants because there are laws that provide them rights, and you should always try to respect them. Because of this, it is essential that you do not interfere too much with tenants.

However, you should perform regular independent inspections of your property to ensure that the tenant is taking care of your investment. However, you should always go via your agent and provide plenty of notice before conducting these inspections.

The good news is that the fee you pay to your managing agent is typically removed from the total amount of rent paid, and it is also tax-deductible.

Typical Characteristics of a Prosperous Real Estate Investor

1. Knowledge

Knowledge can never be replaced by anything else. When you see folks that are truly exceptional at what they do, you will notice that they always have more knowledge than those around them.

Investors in real estate who have huge portfolios have a better understanding of the factors that drive markets, how to time market cycles, and what red flags to watch out for. As a consequence of this, they have a significantly better chance of identifying shifting market conditions before others do so and are better equipped to capitalise on chances of this kind when they become available.

The real estate industry is one of the few that never stops requiring new skills from its practitioners. BiggerPockets.com is a free online resource that provides investors with the opportunity to acquire new skills, network with other investors, and discover answers to any challenges they may be facing.

Many of the most successful investors I've ever encountered are avid followers of the website, and you can find them contributing to the riding blog, making videos, or providing answers to questions posted in the forums. There are also a great number of books available on the topic of real estate investing. They are routinely read by several of the most successful investors that I know.

If you wish to zero in on a certain area in which to expand your knowledge, I suggest beginning with the development of the skills listed below:

• The skill of analysing the cash flow potential of a property
• The capability of identifying a property that is being sold for less than it is worth.
• Acquiring a fundamental comprehension of how to calculate the costs of rehabilitating a property
• Acquiring an understanding of the various economic forces that influence a market.
• Gaining an understanding of the many moving parts involved in being the owner of a rental property (property management duties, etc.)

Your level of worry will directly correlate to the amount of knowledge you have regarding real estate investing. If you want to have a great career in real estate, one of the finest things you can learn to accomplish is to get over your fear of public speaking and public speaking in general.

2. Patience

It might seem like having patience is easy, but in reality, it's not always that straightforward. When it comes to investing in real estate, there is a lot of pressure on you to make moves, and those moves need to be made quickly. The best transactions go quickly, and it may be quite costly to allow projects to go longer than the schedule that was originally agreed upon. As a direct consequence of this, investors are under constant pressure to accomplish more in less time and at a lower cost.

The most successful investors have learnt to remain calm under pressure by exercising patience and knowledge. They are aware of when it is necessary to go quickly and when it is more appropriate to halt and observe how things progress. When it comes to investing in real estate, patience can come in a few different packages. You can avoid making a lot of costly mistakes if you learn to identify the situations in which you'll require more experience by yourself.

One of the most common and costly errors that investors make is purchasing a piece of real estate for the express reason that it will help them achieve a goal that they have predetermined in their heads. A lot of novice investors will plan out when they would like to buy their next piece of real estate and then feel pressured to actually go through with the purchase, even if the offer isn't all that terrific.

The most successful investors don't feel pressured to purchase a certain number of properties every month. They are aware that if they do not purchase one this month, they may instead purchase two the following month. It is essential to have the patience to wait for the ideal transaction, and having the discipline to wait until it presents itself is a quality that is quite vital to possess.

Another mistake that inexperienced investors frequently make is entering the market at the incorrect point in its cycle. It's natural to feel compelled to join in on the housing market action when everyone else seems to be doing it. Top investors zig when everyone else zags.

When others are greedy, it makes them scared, but when others are fearful, it makes them greedy. If you have the intestinal fortitude to wait for the market to slow down or even crash, you will be rewarded with a much better opportunity to purchase assets at a much lower price.

Developing the ability to wait patiently in the face of mounting pressure to take action is a difficult skill to acquire. However, the most successful real estate investors have figured this out and are now reaping the benefits of their efforts.

3. Vision

From the outside looking in, it could appear like investing in real estate is all about the statistics, but in most cases, this is not the case. In most cases, the best way to develop wealth is to invest in cash-generating real estate and keep it for a long period of time. However, the most successful investors do more than just buy and hold. They create value to their portfolio in a variety of different ways by purchasing assets, improving those assets, and selling them.

The difference between average investors and the best investors is the ability to foresee the potential of a piece of real estate and then act on that potential. There is a phrase in the real estate industry that goes "highest and best use." It discusses determining the most beneficial application for the property and then trying to make that application a reality. Good investors are adept at doing this.

You won't merely find good offers in a market that's heating up. You make good bargains. Excellent investors are always looking for new ways to increase the value of their homes without spending more money than is absolutely necessary. Those who have the foresight to purchase an ugly duckling with the intention of transforming it into a beautiful swan stand a good chance of reaping substantial benefits from their efforts.

The following is a list of some of the most popular methods investors do this:

• Increasing the number of bedrooms in a home that once had fewer than three
• Increasing the number of bathrooms in a home that originally had fewer than two
• Increasing the area without increasing the cost. Most of the time, this is accomplished by transforming detached structures such as carports, Florida rooms, efficiency rooms, or covered storage facilities into permanent parts of the property.
• Purchasing properties that have good bones but could use some inexpensive cosmetic work.
• Investing in rental property and then raising the rents on those properties
• Purchasing industrial or commercial property and so reducing costs

The most successful real estate investors have perfected the art of increasing the value of their properties using a variety of strategies. The most successful investors have the vision to take something as it is and make it a better version of itself, regardless of whether they are a large-scale real estate developer who develops an experienced buyer who will pay top dollar or a weekend warrior handyperson who buys a fixer-upper and does the work himself. Both types of investors possess this ability.

4. Efficiency

The most successful people in business understand the need for efficiency, and real estate investing is not an exception to this rule. If we were able to minimise the impact of interruptions and work more efficiently, the vast majority of us would be able to achieve significantly more in life than we currently do. The most successful real estate investors are experts in this field.

Smart business people look for items that take up time throughout the day that don't add to the bottom line in order to become more efficient at what they do. This helps them identify areas in which they may make improvements. When we answer every email, take unannounced phone calls, or follow up on projects that are someone else's duty, we are stopping ourselves from focusing on what is truly important by doing these things.

After you have gained an understanding of the significance of being efficient, you are more inclined to start insisting that those around you do the same. Contractors, for instance, are considerably less likely to miss their deadlines when they are aware that their supervisor is an efficient person who demands the same level of productivity from them. This guiding philosophy may be found woven into each and every one of the company's operations.

The most successful investors anticipate receiving information in a timely manner and in a format that is most conducive to their comprehension. Therefore, they make efficient use of their time by engaging in activities such as listening to audiobooks and podcasts during their commute in the morning and delegating the task of responding to emails and phone calls to assistants. If you want to move your company to the next level, you should begin by working to improve your personal efficiency and determining whether or not this has a direct impact on your level of production.