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Considering investing in property?

Saturday, 23 January 2016

Nick Reade, Chief Executive BankSA

Purchasing an investment property is a popular strategy to grow wealth, but finding the right property for you does require some homework.

First, be clear on your investment strategy and determine whether you have short or long-term goals. For example, do you want an investment property that provides high rental returns for cash flow purposes – which is often the preference for investors with short-term goals – or one that is more likely to generate greater capital growth in the longer term?

Second, develop an understanding of the various tax implications of property investing, and be mindful of all the additional costs that you’ll incur, including stamp duty and conveyancing charges at the time of purchase and ongoing strata fees and maintenance costs.

Third, work out how much you can spend without stretching your budget too far, factoring in any equity that you have built up in your primary residence.

Then, it’s a matter of identifying the real estate listings that match your investment strategy and budget. The real estate catch-cry of ‘location, location, location’ remains a key consideration, so be sure to look at the historical performance of an area. Also consider future growth areas that are likely to attract more people due to infrastructure improvements or changing lifestyle preferences.

And always remember that choosing an investment property is different to choosing a home for yourself. Avoid purchasing on emotion and stay focused on making a purely financial decision.

With almost two million Australians now owning an investment property, it’s certainly a sound wealth strategy favoured by many, particularly in the current low interest rate environment. However, be sure to do your research first and always seek professional advice to help you maximise your return on investment.