How Much Should You Be Spending On A First Time Property Investment?
Ask a group of people what they think is the perfect value of a property investment and you will get varied answers.
Some will recommend caution and choosing an affordable investment that gives slow but steady returns over time. Others will recommend stretching yourself and getting something a little out of your price range for the risk of getting a better return on investment. Which is the correct answer?
The truth is that both are correct and what you decide will depend on dozens of different factors. If you’re considering investing in an Australian property, you should know that you have options outside of the expensive metropolitan areas of Sydney and Melbourne, and that a property investment of just half a million dollars could be more than suitable for your needs.
If you are considering a property investment, you should be thinking in the long term. Yes, areas like Sydney and Melbourne are popular now, but if you’re investing for the first time a more conservative approach is a better bet, as it offers lower risk and is within your budget but has great long term capacity for growth.
The biggest mistake first time investors make is to jump straight into expensive property investments. This will tie you down to a single investment for the foreseeable future, meaning you won’t be able to add to your property portfolio anytime soon. You need to be looking at properties that are affordable enough to ride out any interest rate hikes in the future while providing a predictable rental return.
It is strongly recommended that if you’re a first time investor, that you partner with a property finance expert to help you inform your decision. There are many aspects to property investment worth considering such as choosing a suburb with the best long term outcomes, deciding on whether negative gearing or positive gearing might benefit you and accounting for any future changes to the area that might affect property rental returns, such as proposed zoning changes and changes to local infrastructure and transport systems.
Buying a cheaper property in suburban area might not feel as exciting as the alternative, but in several years’ time you’re likely to find that your return on investment provides you with all the excitement you need.
Related Tag: Australian Property Investment