According to the Mortgage Choice franchise, investing in property is an exciting and life-changing decision that can set you in good stead financially, given the right choices and commitment to its long-term nature.
The recent unsettled and slowing market that has followed in the aftermath of the housing boom should make Australians aware that a rapid rise in property prices in the near future is unrealistic. .
Corporate Affairs Manager of the financial services franchise, Warren O’Rourke believes a reliable short-term investment strategy for property is difficult to achieve for the average consumer.
“In the current climate, borrowers really should consider property investment as a long term strategy especially now house price growth is at a much slower pace,” he said, “Over the long term, there are many regions of Australia where good gains can be made if the buyer researches the area well and identifies the strengths and weaknesses involved.”
It is a good idea for consumers to have specialists do the research on their behalf. A reputable mortgage broker will assist with finding the most suitable home loan for the individual’s lifestyle and needs. A knowledgeable property advisor can assist in choosing an area in which to buy and whether an apartment, duplex, townhouse or house is the best way to go. And an accountant and/or a financial planner can help ensure the purchase is ‘doable’ for the consumer.
Investors should be aware that to gain a healthy profit on a property they should be thinking at least five to ten years ahead before considering selling it, whether it be a home or purely an investment.
With investment properties, Mortgage Choice brokers find the majority of their clients use the equity in their existing property to purchase an investment property and most borrow 100% of the property value plus costs where they have sufficient equity in their existing property/ies.
Many investors prefer long term interest only loan products such as lines of credit with split facilities, particularly where there is still some owner occupied debt to be repaid. This gives them flexibility and breathing room to afford managing loans on two or more properties.
“And when buying a property, considerations should be practical. If it’s an investment property the buyer should ensure tenants will feel comfortable living there and if it will be the buyer’s home then they must ensure they will feel comfortable living in it, “ Mr O’Rourke said.
When purchasing a property, Mortgage Choice suggests buyers give it the ‘Three Ps’ test:
Position
• Is it close to transport, shops, cafes, schools, sporting facilities, parks and amenities?
• Is it functional for its purpose as a home – for me or for a tenant?
• Will the location fit my lifestyle (as a tenant or a landlord)?
Price
• Can I afford it?
• Does the purchase price represent good value?
• Can I find something with more potential for less cost?
• Will it work within my long-term investment strategy?
Potential
• Does the area have good capital growth potential?
• Is the demand for rental properties strong in the area?
• Can you add value or further comfort in the future through renovation or extension?
• Does it need any repairs or renovation upon purchase?
• Will renovations increase the property value to more than the renovation cost?
• Will the property need a lot of maintenance throughout my time of living there?
• Is the property easy to sell - would it be attractive to future buyers?
The answers will indicate whether the property investment will produce a sound return. Consumers should not get too caught up in statistics but should research as much as is necessary, keeping in mind what the property is intended for.
“A purchaser should trust their instincts to a certain extent, too, and if they’re still not sure then turn to a property advisor. Many property advisors prefer houses with a good size land allotment provided they are well located to schools, shops and transport,“ Mr O’Rourke said.
“However, many people purchase units in good locations and these have provided them with good returns and capital growth. There are many factors to consider and that is why investors should consult an advisor for both the property and the property loan”.
Mortgage Choice loan consultants are accredited to provide professional home loan advice on, and choice of, home loan products offered by a panel of 27 leading Australian lending institutions. Mortgage Choice does not have its own loan products and its loan consultants do not charge for the service so the service is worth looking into.
“When it comes to finding a home loan to suit their current circumstance, property investors should consult a mortgage broker to sort through the wide range of loan products available and make sure they choose the most suitable mortgage,” Mr O’Rourke said.
There are enough other considerations around a property purchase to be concerned with - purchasers need to be aware of lending restrictions and property value fluctuations that can occur with inner city properties, commercial zoning, warehouse conversions, etc, as well as capital gains taxation issues, property stamp duty costs on selling and buying and much more.
This is why investment properties are generally long term strategies – but usually worthwhile. Further information on the property buying process can be found on the Mortgage Choice website or within the new 20-page 'Step By Step Guide to Property Ownership' booklet, available to anyone who contacts their local participating Mortgage Choice loan consultant.
30-May-2006