MAKE THE RIGHT MOVE

SAMANTHA LANDY

IF the term “as safe as houses” is anything to go by, investing in property can be a solid way to build wealth.

A typical Australian home has gained 16.1 per cent in value and national rental rates jumping 6.6 per cent in the past year.

The former marked the fastest annual growth in 17 years and the latter, the quickest in 12 years, says CoreLogic.

But not every property is a winner, and there is plenty budding investors need to consider before they start building a portfolio.

The first question would-be property investors should ask themselves is: what do I want this property for?

This is the advice of Stockdale & Leggo chief executive – and seasoned investor – Charlotte Pascoe, who recommended asking five key questions.

“Are you looking for depreciation and tax benefits? Or do you want to one day live in it, so are you buying for your future self?” Ms Pascoe asked. “Are you buying it because you want capital growth? Or so you can leverage it and get more properties? Or are you looking for rental yields?

“Figuring out what you want the property for is the first step many new investors forget to do. They should sit down with their accountant or financial adviser and map out their next 10-20 years.”

Buyer’s advocate Frank Valentic agreed property investors should buy with a long-term view as opposed to “trying to time the market”.

Mr Valentic recommends his clients aim to hold their investments for seven to 10 years – in line with the latest CoreLogic figures showing Australian houses held for nine years and units, for eight, typically sold for a profit.

“And because of the high transaction costs – like stamp duty rates and capital gains taxes – you generally don’t want to be trading properties regularly,” he said.

Mr Valentic said most of the successful investors on the books at his agency, Advantage Property Consulting, focused on achieving high “capital growth first, and rent returns second”. But he agreed each individual needed to work out what they wanted from an investment.

Two real estate cliches actually help answer this question, Mr Valentic says.

“It’s all about location, location, location,” he said. “If a property isn’t in the right location, we won’t even look at it for an investor. Also, land value appreciates and buildings depreciate. So if you can get a house with some land, that’s gold for an investor.

“If you can’t afford a house, try to buy a unit with some land.”

Expanding on what the “right location” was, Mr Valentic said easy access to the CBD had traditionally been a big factor. That had changed with the normalisation of working from home – but whether that would be permanent was yet to be seen.

Proximity to key amenities, such as public transport, shops, eateries, parks and schools, and lifestyle perks such as the beach, would always boost your chances of earning strong capital growth and attracting a tenant.

REA economist Paul Ryan said search activity on realestate.com.au indicated lifestyle and space had pushed up renters’ wishlists, with living near the city becoming less important.

“People are working from home and thinking, ‘if we’re not working from the office, can we choose somewhere with more lifestyle amenity’,” Mr Ryan said.

Ms Pascoe encouraged first-time investors to consider regional areas for this reason, as well as their affordability.

“Too many investors buy in their backyard,” she said. “If you’re going to invest in a regional area, you want to know what infrastructure is coming in the next five to 10 years – if a train station is going in, or a hospital, the area is expecting a population boom.”

This meant a larger pool of prospective tenants – and buyers when it was time to on-sell the property, she said.

“(New infrastructure) can increase your property’s price overnight,” she said.

Investing in a tree or sea-change area also opened up the possibility of listing the property on Airbnb or another shortstay accommodation platform – a potentially lucrative option.

Ms Pascoe also advised buying a lowmaintenance home, or something you could fairly easily add value to. Considering the key tenant demographic in your target suburb could also get a renter in quick smart.

Before becoming a property investor, it is important to consider what it means to be a landlord.

Ms Pascoe said this should involve factoring additional costs into your purchase budget, including property manager fees and a “slush fund” to cover any urgent repairs.

“Remember, while you own the property, it will be someone else’s home,” she said.

She also advised having money put aside in case your property became vacant.