Last Modified: November, 17th 2017
If you are considering entering the property market in Melbourne for investment purposes, there are some questions that you need to ask yourself before you begin. Not the least of these is what you want to achieve, and over what time frame. Remember that buying investment property in Melbourne is a long term strategy; the longer you hold on to your property, the more wealth you will accumulate.
- Exactly What Do I Want To Achieve From Property Investing?
- What Sort Of Property Should I Buy?
- Where Should I Buy My First Investment Property?
- When Is The Right Time To Buy An Investment Property?
- What Happens If I Can’t Find A Tenant?
- What Happens If Interest Rates Rise?
- What If There Is Another Recession And The Market Crashes?
- What Happens If I Get Tenants Who Don’t Pay The Rent Or Damage The Property?
- Should I Get Advice From Family And Friends?
- How Many Properties Should I Own?
Exactly What Do I Want To Achieve From Property Investing?
As with anything in life, before you can set out on a journey, you need to know where you are heading. What is your end goal? Do you want to become wealthy, and if you do, what is your definition of wealth? Would you settle for financial freedom, having enough to pay all of the bills and buy whatever takes your fancy?
Do you simply want a lot of money? Remember that money is only a tool. It is a pile of paper with some printing on it. When you have a lot of these pieces of paper you can trade them for something else that you want, but simply owning it gets you nothing at all.
Are you looking at Melbourne property investment as a means of taking early retirement? How much money will you need to retire in comfort for the rest of your life?
These questions should be pondered, so that you really understand your end goal.
When considering buying investment property Melbourne, you need to ensure that you are buying the right sort of property. That is, a property that is popular with both tenants and owner-occupiers. Tenants will provide you with an income, while owner-occupiers will drive prices upwards.
Today, many people are looking to move into smaller properties nearer the city centres, so inner suburban apartments are a good investment.
Where Should I Buy My First Investment Property?
You should be looking at buying investment property in Melbourne within about 10 km of the CBD. Look for suburbs that have a history of outperforming the overall market, or ones that are becoming more popular places to live. Then find the hottest spots within those suburbs. Often, these will be near to the water, and/or close to amenities. Location is critical to the performance of your investment property Melbourne.
When Is The Right Time To Buy An Investment Property?
Absolutely the best time to buy is when the market is down and flat. This is for the obvious reason that prices will be lower, and historically investment properties Melbourne have always increased over a ten year period. In fact, as a rule of thumb, prices usually double every ten years.
However, many people fail to buy when the market is low, fearing that it may go lower. When prices rise there is a tendency to rush out and start buying, and many buy at the top of the market. There will always be corrections, of course, but property investment Melbourne is a long term strategy, and you should hold on to your property for as long as you can in order to maximise your return.
The best advice? Don’t follow the crowd. Do the opposite of what the crowd is doing, and you won’t go too far wrong.
What Happens If I Can’t Find A Tenant?
If you have bought Melbourne investment property in the right location, you should have no problem finding tenants. Your property should be in highly sought after areas, preferably with a shortage of rental properties available.
To ease your mind, the vacancy rate in Melbourne is around 3%, which means that 97% of Melbourne investment properties are rented.
What Happens If Interest Rates Rise?
They will do. Over any given mid to long term period, interest rates fluctuate. So sometimes they will rise, and at other times fall. Remember that in order to gain the best return on Melbourne investment property you need to keep it for at least ten years, and during this period, the interest rates will vary.
However, one advantage is that as a property investor you get more tax back to cover the interest, so you are in a better position than an owner-occupier. You could also choose to fix your interest rate, so that you know where you stand for a couple of years, or choose an interest only loan in order to maintain a lower repayment.
Again, buying investment property in Melbourne is a long term strategy. Over any given ten year period, the residential property market has only ever gone one way, and that is up. Consider what your own home was worth ten years ago. Investing in property Melbourne is one of the safest and most secure investments you could make.
What Happens If I Get Tenants Who Don’t Pay The Rent Or Damage The Property?
If you choose the right sort of locations for investment property for sale in Melbourne, you will lessen the risk of getting bad tenants. However, you should always take out adequate insurance. Obviously, you will need building insurance, and also landlord insurance.
The other thing you should do is to get a professional property manager to run your properties for you. You will save a lot of hassle in the long run, and one of the things the manager will do is to screen any applicants for you.
Should I Get Advice From Family And Friends?
Unless they are already successful investors in property, absolutely not. Most will only make negative comments, and if they are not doing it themselves how can they possibly offer any advice that is worth listening to? Only take advice from successful investors and property professionals who know what they are talking about.
How Many Properties Should I Own?
The short answer is as many as possible. However, realistically you should aim for at least four. Anything less than that will probably not give you the lifestyle that you are looking for. Buying an investment property in Melbourne should only be the first rung on the ladder.
The main thing is to get started. Too many people procrastinate and never do anything. Indeed only 7% of Australians own a residential investment property. It is a sad fact that around 96% of Australians work for forty years of their lives and then retire broke. That leaves just 4% who are financially free.
You simply need to ask yourself whether you want to be one of the 96%, or one of the 4%.