Valuable advice for would-be property investors

PROPERTY investment is getting sexy again, thanks to record low mortgage interest rates and rising house prices in most states.

Real estate specialists say investment conditions for firsttime landlords are improving, but warn that investors need a solid plan before sticking their foot in the door.

Figures from the Reserve Bank show while owneroccupier housing debt dropped 5 per cent last year to $1.15 trillion, investment debt held by 2.2 million landlords surged 12 per cent to $666 billion.

Prime Property Strategies director Sasha Holland said FOMO – fear of missing out – was developing in some states as home prices rose amid “very, very low interest rates”, and this could lead to an investment frenzy.

Ms Holland said getting your finances sorted was the first step to investing in property, and people shouldn’t assume they couldn’t afford it.

“There are many ways that you can finance an investment property, whether you have your own business, you are a part-time employee or using a guarantor,” she said.

Dipping into their own

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Your strategy can be more aggressive, and maybe consider generating growth via renovating a run-down property. Be mindful of future plans, and don’t overcommit financially if it will cause stress when you have a family. Cash flow is vital – especially with kids around – so consider properties with neutral or positive cash flow rather than negative gearing.

If you’re 50 or over, you still have 10-15 years of working life, so negatively geared property can be good if you can sustain it.

YOUNG COUPLES FAMILIES MATURES

Would-be investors should set clear goals, and discuss their plans with their loved ones, Ms Holland said.

“Investors can find themselves in a state of analysis paralysis because there are so many investment options to choose from and they don’t have a clear idea of the type of investment they want or need to achieve their goals,” she said.

Binnari Property managing director David Hancock said new investors should understand there were “markets within markets” in Australian property that moved in cycles.

He said while buying in your own suburb or city could be prudent because you understood the area, this strategy might not always work.

“If the market they understand well happens to have already been through a period of growth, it may be quite stagnant for the next five to seven years,” Mr Hancock said.

He said potential investors should do plenty of research, understand what the locals were buying, and seek help from a property professional.

Building a team you can trust – mortgage broker, solicitor, accountant, property investment specialist – was vital, Mr Hancock said.

“Have professionals around you who have been through the process,” he said.

“Once you have done it once, it becomes easier.”