If we follow the Australian Dream taught to us by the generations before us, we are continually encouraged to own our own home as soon as possible. We leave school or higher education, get a job and told to start saving to become proud home owners and build a strong foundation of family wealth for the future. As most of us are well aware these days, this is not so easy.
Many things have changed since our baby-boomer days. Employment trends offer less stability, cost of living is sky high here in Melbourne, and a two income family is not a guaranteed entity either. So how do we become home owners or better still, property investors in Australia in 2020?
One of the biggest set backs in property investment is the idea that we have to own our own home before we become property investors. We have been taught that buying a house is one of our greatest investment and we are even persuaded by our government to take advantage of our generous first home owners stimulus to do so. However, this limiting mindset can actually hold us back from a bright future in property investment and stifle us from building a strong portfolio that could create real wealth faster.
When we think of property ownership, we generally consider our home as an asset. But as an investor, owning your home should not be considered an asset, as it is not making you any money when you are living in it. Owning your own home is actually taking away from money that could be invested elsewhere and offering you strong investment returns.
Clearly, you can’t just buy a house and start watching your money roll in. A great deal of consideration needs to go into each and every property you purchase. Strong attention needs to go into the price of your purchase, the location, timing and knowing how to make the right moves. One thing that has remained stead fast over the years is that property continues to be an improving financial trend. While there are the inevitable downturns in the market, real estate is still considered a low risk investment. Nevertheless, property ownership takes patience. But with consistent effort, your investment could become an income generator that helps you to create an enviable portfolio.
As property ownership is a significant investment, you are not expected to buy your dream home straight away. Consider starting with a small apartment near a university, a townhouse near schools or a unit close to public transport with access to the city. This sort of investment can start producing returns sooner, allowing you some freedom and equity to continue investing. If you are already a home owner, your ability to use your existing equity can see you owning your next property sooner.
Investors need to their homework. While property location is important, knowing the history of the property, expected rises or falls in value, surrounding developments and proximity to local services and desired position to hotspots are incredibly important. Be realistic in the cost of maintenance, rates and services will save much pain in the long run. While being prepared to invest in upgrades, or refurbishment will actually be putting you ahead of the game and possibly increasing the value of your returns.
Experts also encourage you to consider who you are lending from, as there are many advantages and disadvantages to using your trusted banks and lending societies. But most importantly, make sure the property you invest in is in an area of some growth or stability. Finding a cheap property to invest in does not guarantee returns. Look for growing suburbs and watch trends in development or additions of schools or public transport. And while we are at it, remember to keep your mind open to properties that are not actually your style. We are all individuals with unique tastes, so being prepared to invest in a great home in a budding area that is not really your style, could be one of the wisest decisions you make.
Why don’t you talk to Propertifolio and see what areas are trending in Melbourne and we can talk smart management while you are there.