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Getting Started

is investing a gamble

For many investors, starting the journey of money making is a nerve-wracking process. The global market has an endless supply of new projects, markets and shares that can be invested in but how do you know whether it is going to stay stable and return finances to you? Is investing a gamble? Would property be the safest way to invest?
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By looking at the history of a market you will see patterns and properties that show whether or not it will be worth it for you in the long run.

 

So, Is investing a gamble? How do I know if my chosen investment is a good investment? 

Good investments will typically have two features.

1. A high capital growth.

2. A secure income, indexed for inflation.

 

While these properties are hard to control or predict when first buying an investment, it should be noted that over decades, property has maintained both these attributes.

 

Property in Australia has maintained a capital growth of 10% or higher per year consistently. It has also managed to stay 2-3 percent above inflation.

 

If one wants to invest wisely, property investing is a good place to start!

 

Buying in an area that is currently increasing in population, has adequate public transport and isn’t isolated from central business districts will ensure capital growth is consistent.

 

Capital growth has been maintained in property for many reasons. Supply and demand has ensured that over the time the Australian property market’s capital growth has maintained well above inflation as our growing population increases housing demand.

 

While the ‘Great Australian dream’ to own your own detatched home on a fenced block of land is still alive, for many reasons, the rental market is growing fast, giving a great opportunity for investors to profit through property.

 

New couples and new families are the largest market for rental properties in the country. Currently, there is more demand for rentals than there is supply. An investment property with features targeted to the typical lifestyle and affordability of a small family or working couple (e.g. 2-3 bedroom, small yard, convenient location near public transport, shops and schools) will ensure capital growth.

 

Not only will the house sell for profit, if you’re renting it out, the mortgage will pay itself!

 

Even though Australia certainly doesn’t have a lack of land, population density and urban sprawl is becoming a big issue in major cities and coastal areas. We are already seeing a huge increase in property costs in locations close to major cities because of housing demand and a lack of land.

 

In Sydney housing prices have increased by around 17% in the last 15 years, while surprisingly,  Sydney is experiencing the smallest property boom in the country it is still growing at a healthy rate; particularly  the cities outer western suburbs.

 

Australia’s property prices have increased consistently for more than two decades.

 

Government incentives such as The First Home Owners Grant and property releases are seeing more and more new homes built – tailored for small families and working couples – and the urban lifestyle is becoming increasingly popular.

 

The market doesn’t look to be slowing and current interest rates favour investors and existing home owners.

 

All these factors make property investment a great method for increased wealth. It almost doesn’t seem a gamble!

Article by James Parnwell & Jordan Cox

becoming rich

There is a huge misconception in society today: the idea that, in order to become wealthy, you must first have a wildly high-paying job.

Unless one invests and cultivates their finances well, the reality is a six-figure salary will only go so far.

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People, regardless of their wage, tend to always live beyond their means.

Long Term Property Investment

Have you noticed that Doctors continually stress that quick-fix diets won’t sustain weight loss? Their maxim is that a healthy diet and exercise is the only way to maintain weight. Still, each year, the fitness market rolls in billions on fad diets because we live in a society that wants to see results now! Funnily enough, the same goes for building and sustaining wealth. Investing is a process, built over time using key principals. Thinking ‘long term property investment’ is paramount to being a successful investor and becoming wealthy.

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Rather than seeing yourself living in your dream house and driving your dream car in your 20’s or 30’s, a simple change of mind-set and a plan, could be all you need to see yourself retired early and living the life you’ve dreamed of.

Overnight riches seldom results in increased wealth because often the individual doesn’t have a plan for the money and before they know it, they’ve spent it.

Property investing can be one of the safest and most rewarding ways to invest your income and see a great return. Many of the government rules such as age, income, and health history that we see in superannuation investments don’t apply.

Long Term Property Investment is a process of habit and patience

Simply put, long term property investment is a process of habit and patience which results in a return after many years labour. It’s the old story of the tortoise and the hare. The tortoise wins the race!

It’s important to remember that when it comes to property investment, time is on your side. Having to wait for a financial return isn’t a burden, it’s a great opportunity. With patience, and a well thought out plan, you could afford to start investing in property for as little as a couple of hundred dollars a week.

Formulating a strategy regardless of what the market looks like is the first step.

As time passes, and the market turns this strategy shouldn’t change. The only changing factor should be that as property values increase, you refinance so that your debt payments increase with your assets.

This formula, will work for both long-term and short-term property investments. However, long-term investments are rarely affected by down-turns in the economy, high interest rates, or rises in unemployment and living expenses.

Another pro to long term property investing is that – while timing, finding the best interest rate, and negotiating price is vital in short-term investing – time levels out these stresses and consequently makes them less important in the long run.

The beauty of long-term investment and property investment is that it gives average income earners, new starters, even students, opportunity to put the little finance they have in their hand towards building their own wealth.

Risk is always a reality but with a small start you moderate this risk and it becomes more manageable over time.

It could be, that a simple change of our mindset and values is all that we need to be on the way to becoming wealthy in our lifetime.

Article by James Parnwell & Jordie Cox

If you would like some further information on anything related to Investment Property or Investment Finance please contact us

One of our team of experienced Investment Property coaches or Investment Finance Mortgage Brokers will be happy to reply to you with some helpful advice…

Please let me know if you have any questions.

australian investment property

If you are an overseas investor and are looking into buying an Australian Investment Property then it’s good to know about some of the real strengths of the Australian Property Market. Apart from the fact that every block of land comes with a free Kangaroo and a cuddly Koala Bear (this may or may not be true :-)) what you really want to know is whether or not you are buying into a strong nation where your money is safe!
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1. Australia has Strong Population Growth

We are growing at 1.4% through a mixture or births and immigration. This means there is always an increasing demand for houses. Demand means your house will tenanted all of the time. In Sydney for example its common for there to be over 50 enquiries for a single rental property. There are cars parked up and down the street. it’s quite a sight to behold!

2. Australia’s Banks are Strong

The truth is that the locals hate our major 4 banks, CBA, Westpac, ANZ and NAB. They make billions of dollars and every year they break the profit record from the year before. However, the plain truth is that they are heavily regulated by the government and play it safe. During the Global Financial Crisis of 2008 our major banks experienced little more than a hiccup, whilst many of the banks in other parts of the world went to the wall and were bailed out by their governments to avoid major crises. There was no need for that here!

3. Australia has a very Healthy Economy

I remember when I studied economics at University and the lecturer said that 6% unemployment was full employment. In other words, everyone that wanted a job had one. At the moment we are 5.4% unemployment. This is extremely high and a statistic that many other western countries envy. The US & UK are at 7.8%. This means there is a large percentage of the population who can afford to rent your Australian Investment Property.

4. Some of our Cities have an Undersupply of Properties

Sydney is certainly an example of a city where there are more people than houses to fit them in. This is always good news for the investor because it means the rent will increase and demand for property will stay strong. Properties only usually drop in value when there is an oversupply. There are some areas of Australia where this is the case, such as the Gold Coast, however this is by far the exception and not the rule.

5. Household Debt is Relatively Low

After the GFC there is definitely a trend towards saving more and reducing our credit card debts. The large debts are mostly in the hands of those that can afford them. This is encouraging to overseas investors as it means the default rates are very low. There is a very high percentage of people who pay out their loans in full and meet every repayment. This means the possibility of there being an Australian Investment Property crash is very low.

6. Home Ownership is Standard

Every Aussie aspires to own a property. This is just the Australian way. 70% of us are paying off our homes and about half of all the houses in Australia have been paid off completely. In short this means that an Australian Investment Property will be surrounded by locals who own their houses, raising the standard of each neighbourhood and the desirability of your property.

7. Australia is a Beautiful Place

australian investment property

When I have relatives come from the UK they often tell us that we live in paradise. That living in Australia is like living on holidays permanently. It certainly is a wonderful place with friendly people, beautiful beaches and a lot of fun to be had.

If you would like some further information on anything related to Australian Investment Property or Investment Finance please click contact us. If you you would like more statistical information on Australia please visit the Australian Bureau of Statistics.

One of our team of experienced Investment Property coaches or Investment Finance Mortgage Brokers will be happy to reply to you with some specific and helpful advice…

Article by James Parnwell & Jordan Cox

If you would like some further information on anything related to Investment Property or Investment Finance please contact us

One of our team of experienced Investment Property coaches or Investment Finance Mortgage Brokers will be happy to reply to you with some helpful advice…

Please let me know if you have any questions.

Investment Finance: Can I Get Finance?

July 12, 2012 4:43 pm
posted by James Parnwell

investment finance

In order to qualify for a mortgage for your first investment property you need to have an income and a deposit. Investment finance sounds simple, doesn’t it? Well, sometimes it is and sometimes it isn’t.

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What you need to know when it comes to Investment Finance:

Income

The beauty of an investment property is that you get a second form of income, Rent! However, you need a basic income to get you started. If you have a job, then a couple of payslips is often all you need to verify your income. If you are self employed, then you will need two years tax returns for yourself and your company if you have one, plus two years of financials for your company. You will destroy a rain forest in the process of providing those documents. Not impossible, just a bit more involved.

As an investor you will also get tax breaks to assist you in your repayments, this is almost like a third income stream. Let me illustrate this for you…

Suppose we have a young guy, living at home who earns $50,000 per year and has no debts. If he were to apply for a mortgage for a house that he planned to live in, the maximum he could apply for would be approx. $320,000. However, if he was to look at purchasing an investment property that earnt him $400 a week in rent he could borrow up to $500,000 in investment finance.

The point is that young people can get into the market earlier than they first thought if they want to buy an investment property.

Deposit

Our friend who just realised he could borrow $500,000 is limited by another factor. He needs to have a deposit. You see, the bank is very interested in you investing something into this property. If you don’t put any of your hard earned cash into it, then often it feels like a bit of a fairy tale. It’s these loans that often fall over. So he will need a minimum 5% deposit. or in this case $25,000 plus costs.

This can be saved up over time, it can be given to you (by some very lovely parents perhaps) as long as it stays in your account for three months or your parents/family can go guarantor for you.

So what are these costs? The biggest cost is definitely stamp duty. On a $500,000 property the stamp duty could be as much as $18,500. The other costs include that of a conveyancer plus any other incidental fees such as pest and building inspections etc… It’s best to have about $2,000 available.

Sounds like a lot? Yes it is, however, there are a lot of grants going around for people who buy brand new properties. The government is very interested in stimulating the building industry and is prepared to make things easier for you to get started.

Credit History

The third and final part of investment finance is in regards to your credit history. If you have ever had some problems with paying your phone bill or credit card then it would be worth enquiring about your credit history. If you made a payment two days late then you have nothing to fear, but if you got very late on something and received several notices then there is a change you received a default. This can make borrowing difficult, not always impossible, but certainly more difficult.

Article by James Parnwell

If you would like some further information on anything related to Investment Property or Investment Finance please click contact us

One of our team of experienced Investment Property coaches or Investment Finance Mortgage Brokers will be happy to reply to you with some specific and helpful advice…