Are you considering property investing? You’re not alone. Real estate is often coed as the safest and most secure investment option.
What is real estate investment?
In most cases, real estate is a fantastic way to put your money to work. If its value rises over time, it might be a wise long-term property investment in Australia and produce passive income for the owner. Using it could be the first step in a bigger plan to get your finances in better shape.
This is why ensuring you are prepared before beginning real estate investments is important. You’ll require a sizable initial investment to enter the real estate market, so getting professional help is vital to ensure you make the best decision for your circumstances. This is because the real estate market is constantly changing, and what might have been a good investment a year ago might not be today.
At Investorfi, you will be provided with access to the support and advice of our experienced mortgage brokers. We’ll help you every step of the way.
Is Paying With Cash the Best Option?
The amount of cash you have in financial products like savings accounts or term deposits might be a factor in determining whether or not your investment plan will deliver on your financial goals.
Ultimately, how you invest your money will depend on your unique circumstances. Still, any financial investment should be approached with caution when investing in Australia’s long-term property investment. However, some people use cash because of the many benefits it offers, such as:
Having the Available Funds to Do So
If you’re already contributing the maximum to your superannuation, have a paid-off mortgage and have no other debt, you may find that you have some extra cash to invest.
Getting a Good Deal on a Property
In a market with rising prices, having cash available could help you negotiate a better purchase price for a property.
Wanting to Avoid Paying Interest on a Loan
One of the significant benefits of paying with cash is that you’ll avoid paying interest on your investment loan. This can save you thousands of dollars over the life of your loan, meaning more of your money will go towards actually building equity in your investment.
Believing That It Will Be Easier to Sell a Property If It Is Paid for in Cash
Properties paid for in cash sell faster and for a higher price. This could be because buyers perceive less risk in buying a property already paid for.
How Can I Build Wealth With Real Estate?
Real estate investing is a long-term game, and patience is key to building wealth through real estate. Also, property investing in Australia requires an early understanding of the following three phases:
During the accumulation phase, which can last anywhere from 10 to 15 years, a diversified portfolio of ‘investment grade’ properties is compiled with the goal of capital appreciation as a primary driver.
In the consolidation phase, you pay off your properties’ debts little by bit, which boosts their cash flow when you need it the most amidst the recession.
The last phase is where you relax and enjoy the cash flow machine you built in the first three stages.
Some of the essential things you might consider when building your wealth with property investing are as follows:
Buying Properties That Will Appreciate Over Time
Look for areas that are growing or have growth potential. This may include upcoming infrastructure projects, changes in zoning or anything else that could potentially increase the value of your property.
Generating Income Through Rental Properties
This is a great way to generate passive income and build your wealth over time. Investing in properties in high-demand areas can maximise your rental income and minimise vacancy rates.
Flipping Properties
This involves buying a property, making improvements and selling it for a higher price. This can be a great way to make a quick profit, but it requires some knowledge and experience to do it successfully.
Developing Property and Selling It for a Profit
This is a more complicated and risky strategy, but it can be profitable if done correctly. It involves buying land, getting the necessary approvals and permits and then either developing it yourself or selling it to a developer. Whatever strategy you choose, ensure you do your homework and understand the risks before jumping in.
Is There Such a Thing as Investment Loans?
Depending on what you want, investment home loans can be straightforward like a standard home loan, or they can be more complicated and help you make the most of tax, gearing and payments. You can keep track of your investment loan with the help of loan features like redraw, offset and extra payments.
The current investment property home loan rates might vary based on the loan that best fits your financial capability. Borrowing money to invest is a mid to long-term strategy (at least five to ten years). Most of the time, this is done through margin loans for stocks or loans for investment properties. For experienced investors, borrowing money to invest is a high-risk move.
Here are typical investment loans:
Interest-Only Loans
You only need to pay the interest on your loan for a certain period, usually up to five years. After that, you’ll need to start paying off both the interest and the principal. This type of loan can help keep your repayments low during the early stages of your investment when rental income might be lower as you’re establishing your tenant base.
Principal and Interest Loans
With this type of loan, you’ll need to pay the interest and the principal from the start. This can increase your repayments, but it will also help you pay off your loan faster.
Offset Account
An offset account is a savings or transaction account linked to your loan. The money in the account is used to offset the interest you’re charged on your loan, which can help reduce your repayments.
Line of Credit Loans
This type of loan gives you access to a line of credit that you can use for investment purposes. You only need to make interest payments on the borrowed amount, and you can redraw the money as needed.
Start Your Property Investment Journey with Investorfi
Real estate can be a great way to build wealth, but it’s not an easy task. It’s an excellent investment for those looking to secure their financial future, but, as with any investment, there are risks involved.
This is why working with professional mortgage brokers to get the best loan for you is essential. They can help you understand the investment loans’ ins and outs and ensure you get the best deal possible.
If you’re ready to start your real estate investing journey, we can help. At Investorfi, we have a team of mortgage brokers who work with different lenders to get you the best possible loan for your circumstances.
