Investing in real estate might sound lucrative. And with the right investment strategies, you can actually generate significant wealth in the long run. Many Australians consider investing in real estate as a part of their retirement planning.
But before you start your investment journey, ensure to hire a trusted Buyers Advocate Australia who can guide you through all the stages of property investment.
According to the Australian Taxation Office (ATO) data, approximately 2.24 million Australian taxpayers are property investors, and collectively, property investors in Australia own 3.25 million investment properties.
And if you want to make money through property investments, you need to know about “investment grade” properties. So, what exactly are investment-grade properties, and how do you generate wealth by investing in real estate? Let’s find out!
To understand investment-grade properties, let’s first understand how property investors make money. Property investors typically generate wealth in the following ways:
- Capital growth: Appreciation in property value over time.
- Rental returns: The cash flow you generate by renting your property to a tenant
- Accelerated or forced growth: Capital growth you create by adding value through upgrades, renovations or development
- Tax benefits: Money generated/saved through negative gearing or depreciation allowances.
Now, out of these four, capital growth is the most important component as it generates the maximum wealth from an invested property.
Now, all properties don’t have the potential for capital growth and to offer rental returns. They lack owner-occupier appeal and the opportunity to add value.
Properties that have the potential to generate wealth through accumulated value addition are known as investment-grade property.
Professional buyers agents spend a lot of time on Property Research Australia to identify propertiesthat deliver wealth-producing rates of capital growth.
So, what are the factors that make an investment-grade property? Let’s take a look!
Finding the correct location is the first step in property investment. Typically, a good location will have:
- Basic amenities close by, such as schools, clinics, hospitals, shops, etc.
- A well-connected network of public transport
- Low crime rates
Sydney’s Eastern Suburbs, Melbourne’s inner city, and Brisbane’s riverfront are a few examples of high-demand areas that can generate good capital growth. Although major cities offer lucrative investment properties, it can be challenging for first-time investors to afford investment properties in those areas.
Your Buyers Advocate Australia can help you identify affordable suburban properties with the potential to generate value in the long run.
Strong market fundamentals help you see the bigger picture in property investment. It involves the macroeconomic elements that make a location tick. These include:
- Population growth
- Presence of job opportunities
- Economic stability.
These factors function as catalysts and can send property values skyrocketing faster. How?
Let’s consider an example: you’ve got an Australian suburb experiencing a booming population. More people indicate more demand for housing, and that’s gold in the real estate game.
Add in economic stability– your investment is less likely to get affected by the changing market condition.
When it comes to property, not all bricks and mortar are created equal. Top-quality building materials and design strategies are the foundation of a solid investment.
They ensure that your invested property stands the test of time, weathering storms and sunshine without breaking a sweat.
Properties built to high construction standards don’t just mean lesser expenditure on maintenance, but they can also give you better returns.
For example, a sustainable, well-maintained, energy-efficient and smart-technology integrated property will have much greater appreciation than a poorly maintained property featuring age-old construction.
Regular upkeep and timely repairs can do wonders for your investment. Plus, it’s not just about preserving the property; it’s about making it more attractive to potential tenants or buyers. When you enlist the services of a Buyers Advocate Australia, you can find properties that are well-constructed and can give you good rental income.
When it comes to property investment, capital growth gives you long-term value. But with rental income, you can reap immediate and consistent benefits from your invested property. But how do you gauge the rental income potential of your property?
That’s where you need rental yield. Rental yield tells you how much rental income you can expect compared to the property’s value.
Here’s how you calculate it
- Divide the annual rental income by the real estate’s purchase price.
- Then, multiply the result by 100 to get a percentage.
- This number is your golden ticket to understanding the cash flow potential.
Now, why is the rental yield so significant? The higher the yield, the better the property is at generating rental income, and that’s what you ultimately want after investing in a property.
- Check out rental listings in your preferred/shortlisted areas during your Property Research Australia, talk to your buyer’s agent and get a feel for the market. This will give you a ballpark figure of what you can charge in rent.
- Property improvements such as a fresh coat of paint or modernizing the kitchen can boost your rental income.
- Also, don’t forget about tax deductions. In Australia, you can claim expenses like property management fees and maintenance costs, which can put extra dollars in your pocket.
As mentioned previously, capital growth represents the increase in your property’s value over time. One of the big driving forces for capital growth is infrastructure development. When a particular suburban area has new roads, public transport facilities, and gyms and can deliver overall good lifestyle amenities, the property values in the area rise.
And don’t forget to access the historical capital growth trends in different regions during your Property Research Australia. This can give you an idea of how an area has performed in the past and whether it’s likely to keep delivering good capital gain in the future.
It’s no surprise that investing in a property requires intensive research, exceptional knowledge of the market, thorough planning, expert negotiation skills and a lot of patience. With buyers’ advocates in Australia, you can smoothly navigate through the property investment process, knowing that someone always has your back!