You need a strong reason to part with your hard-earned money. Australia is going to give you plenty of those. If you are a strategic investor, you already know what factors to look into before investing in real estate in Australia.
You know what goals you want to achieve and you have long-term property investment strategies already forming in your mind. But if you are new to this game, you are probably going to need a bit of advice and guidance. This could be your opportunity to turn your cash into a money-minting asset. The following section contains a checklist that you should keep in mind when investing in real estate anywhere in Australia. Let’s begin:
1. Begin By Organizing Your Finances
You cannot imagine investing your money without organizing your finances. You must have a financial plan ready before you buy any property. Right now, interest rates across Australia are quite low but they do vary from city to city. Usually, this allows people to borrow somewhere between 80% to 90% of the property’s value and just have to gather close to 10% to 20% to pay upfront. You may decide to work with a finance broker to get you the most flexible loan options that are going to suit your needs the best.
2. Understand The Structure Of Your Loan
The next step is to understand the structure of your loan. You can engage a financial advisor to structure your loan whether it is fixed, variable, or mixed. The interest that you pay on your investment property is going to be tax deductable. Remember that there are certain borrowing costs as well that are tax deductable but others may not be. You will be advised to go for an interest-only loan. This is especially relevant for investment properties because you can easily write off the interest amounts when calculating your tax. Remember that going for the contemporary principle and interest structure for your loan may not be the perfect fit given the current economic conditions. But then, the entire structure of your loan will depend on your financial goals as well.
3. Purpose Of The Investment
What is the purpose of your investment? Are you looking to invest in a property so that you can convert it into a source of recurring income? Do you want to invest in a house or a commercial building so that you can sell it off later at a profit? Whatever your goal might be, this is your wealth creation journey we are talking about and the answers to these questions will form a part of your property investment strategies. At any point of time, there are more than 300,000 properties that are available for sale all across the country. According to independent studies, less than 5% of them are investment-grade. So remember to first define the purpose of your investment and then shell out any money for investing in real estate in Australia.
4. Wrap Your Head Around The Upfront Costs
You must have heard about upfront costs from various sellers, buyers, investors, and property management professionals as well. What are these?
– Deposit
Real estate investors looking to invest in residential property will be required to deposit at least 20% of its value. If you want to buy any commercial properties, the percentage changes to 30%. The vendor is going to expect at least this much from you.
– Loan Establishment Fee
This fee is also called your application fee. It is going to cover the cost of document preparation for your new mortgage. Some banks and financial institutions do not charge this fee at all. This can cost you somewhere between $200 and $700 depending upon the amount of loan you have taken.
– Lenders Mortgage Insurance
The lender is going to require this insurance if your deposit is less than 20% of the value of the property. This is a one-time fee that the lender is going to charge just for protection purposes. If you default on your mortgage, this fee is going to give the lender the cover that he needs.
– Stamp Duty
When it comes to changing the ownership and title of the property, the stamp duty is going to cover the cost associated with it. The amount is going to differ depending on which state you are located in. It is also going to fluctuate depending on the value of the property.
– Connections
All your utilities, services, water, gas, electricity, and other amenities are covered under this fee.
– Legal Fee
If you have hired any solicitor, this fee is going to cover his cost.
5. House, Unit, Or Land
The type of property that you are looking for is also an important consideration. A plot of land is like a blank canvas which can be a lot less expensive initially as compared to an already constructed villa. Also, if you intend to acquire this land and turn it into a rental property, there is a long gestation period and further investment that will involve constructing a building, looking for tenants, advertising the property for rent, and a lot more. If you are a first-time investor, a single unit can be your first choice. Despite the high prices, houses still continue to be a preferred choice amounting to close to 38% of purchases.
6. What Is The Age Of The Property?
As a real estate investor, the age of the property would also matter to you because an established building would require the services of a professional property manager and regular inspection of the asset. In a new property, these issues may be limited in number. You can always improve the condition of the asset through renovations.
7. Remember To Negotiate
Is there a rule that you have to accept the asking price? Not at all! It is never advised to suppress your desire to negotiate. If you have the calibre to do it, do not hesitate. Some sellers are always going to price their property really high because they already anticipate that the buyer is going to negotiate. They would then cut down on their asking price and sell it off still at a very considerable profit.
Final Thoughts
Investing in real estate in Australia can be one of your biggest life-changing decisions. Whether you are a non-resident or an ex-pat, the property market in Australia always has something for everyone and every budget.