First-Time Investor's Guide to Australian Property Market
There are so many out there who want to purchase property but aren’t quite sure how it all works.
Property investment in Australia isn’t necessarily easy. It can be hard to know where to start, where to end and how everything works in between.
But it also isn’t overly complicated either, with almost everyone who is willing to put in the time and effort able to make money through property investing.
Let’s dive into Australian real estate investing, demystifying the process that has changed the lives of so many.
1. Develop your Strategy
It is critical that the first step is developing a tailored strategy, which takes into account your personal circumstances and goals.
Developing a strategy should be done well before visiting sites like realestate.com and domain.
Your strategy will answer key questions, such as:
- What’s the right cash flow for you?
- What’s the right yield you’re trying to achieve?
- What capital growth profile your ideal property should have?
- What price point can you purchase at?
A good strategy should also look at the long-term or end goal you’re trying to achieve as an investor.
Is there a certain amount of passive cash flow you’re trying to achieve? Or is there a certain amount of net assets you wish to acquire?
This is one of the most important steps!
So take the time to really nail the details of the strategy.
2. Suburb Selection
Once you know your strategy, suburb selection becomes quite easy.
With many of the above questions answered, you now have a personalised criteria for the right suburb.
It’s then about finding the right suburb that fits the criteria based on your strategy.
The more you develop your strategy, the easier suburb selection becomes. You may even be able to narrow it down to around 4-5 suburbs from all over Australia.
3. Property Type
After a suburb has been selected, it then comes down to selecting a property within that area.
And once again, if your strategy is crystal clear, this shouldn’t be a difficult task.
A good strategy should put you in a position where you know what type of property to buy.
This includes knowing whether you should buy a townhouse, flat, apartment, unit, or house. Size of land, new vs old etc all becomes easier as well with the right strategy.
4. Providing an Offer
After you’ve found the property that’s right for you and meets all the criteria of your strategy, it’s time to make an offer on the investment.
This step really comes down to negotiating. Whether it’s an auction, private treaty, or some other method of sale, negotiating is both an art and science.
5. Due Diligence
Within the contract there will be various clauses stipulating that you’ve done all the correct due diligence before signing.
This includes things like a building and pest inspection or finance clause. The next step is making sure you’ve carried out the due diligence, as per the contract.
Have professionals carry out all the right inspections prior to purchase, so that you can be sure this property isn’t going to have any major issues down the line.
You also need a conveyancer to make sure the contract is airtight and works for you, with no legal surprises that could have a negative impact on the purchase.
6. Sort Out Your Finance
The next step is to make sure your finances are in order.
It’s worth talking to a mortgage broker, rather than going to a bank directly. It’s also a good idea to ensure the mortgage broker is investment savvy, so that they’re in a position to get the right product for you.
Ensuring you get the right product doesn’t necessarily mean the lowest yield, but rather a combination of yield, interest-only or principal and interest (P&I), and how long that interest-only or P&I term will go for, offset redraw, and much more!
7. Pre-Settlement Inspection
Once your building and pest and finances are all approved, then it’s time for a pre-settlement inspection.
Savvy investors will not have to leave their home to carry out all this due diligence either.
These steps, including pre-settlement inspection can be done from the comfort of your home, with other professionals performing these inspections on your behalf.
8. Settlement and Tenancy Occupation
Once all the proper inspections have been carried out, either by yourself or a representative, and the property comes with everything stipulated in the contract, it’s time for settlement.
Settlement simply involves the final payment being made from your bank to the vendor and an exchange of keys.
In the lead up to settlement, a good property manager should also be finding tenants to rent the property. This means you’ll have access to the cash flow from rent almost instantly after settlement.
Every day you’re waiting for a tenant to rent the property means another day of lost income!
9. Maintain cash flow template
It’s important to continue maintaining the cash flow that derives from the property – you need to know everything that is going in and everything that is going out.
Rent, insurance, landlord costs, rates, maintenance, etc, etc – all of this needs to be properly managed so that you can make the investment work for you!
This is just the beginning…
And there you have it – the high-level process of how to invest in Australian property.
But remember, this is just the start. Advanced investors looking to really excel financially will look to expand their portfolio and buy multiple properties.
Check out some tips on DIY investing and building a big portfolio in the video below: