Buying property these days is not just about making a home for yourself and your family anymore. Rather, it is increasingly seen more as a long term investment for the future. And this holds particularly true as the political turmoil sweeping the globe has turned many well known and trusted investment options such as stock markets, the energy sector, precious metals and even liquid currency into highly unstable avenues for investment.
But unlike the stock exchange for example, investing in the property market is a far bigger investment than most other options. This is why a lot of care, planning and foresight has to be has to be taken before making such an investment. Here are some tips that may help you make that all important decision.
1. Sit on it
Once you buy a particular property and have paid all relevant taxes and costs, all you have to do is to wait till real estate prices in that particular locality increase, which would in turn enable you to make a windfall. This holds true even more so for Australia since the property market ‘Down Under’ is widely considered to be one of the safest investments in the world and as a result many speculators and long term investors prefer to ‘park’ their funds in the real estate sector here. This means an almost inevitable rise in property prices in the long run.
This form of property investment is the diametrical opposite to the better known ‘Buy and Hold’ investment theory. Basically, it means very short term investments ranging from a few days to a few weeks and offloading the same as soon as there is the slightest increase in prices. ‘Flippers tend to work on the basis of the slight turbulence that occurs frequently in the market.
3. Cash on Cash returns
Real Estate investments, unlike many other types of investments, are more than capable of creating a ‘Cash-on-Cash returns’ scenario for the prospective investor. Though most real estate experts would not say it, but this is by far and wide one of the most common and simple return formats in the Real Estate industry in Australia. Here is how it works:
Effective gross income $160,000
Less: operating expenses ($50,000)
Net operating income $110,000
Total investment (all-cash) $1,000,000
Cash-on-cash return = $110,000 = 11.0%
4. Earning though rent
When a person thinks about real estate investments, more often than not, he or she is thinking about buying a property and then waiting for property prices to rise till the property may later be sold for a hefty profit. But a far easier way of earning would be though the simple expedient of renting the property for a safe and sustainable source of income.
5. Patience vs. speculation
Many people believe that entering the property market, especially one as lucrative as the Australian real estate sector, is a sure-fire means of becoming a millionaire over night. But that is not the case; in fact, taking advantage of the market’s turbulence is pure speculation at best. Sometimes, such ventures may yield a sizable profit, sometimes they may not. This is why it may be prudent to study the market and be prepared for the ‘long haul.’