The property market is on fire. The high rate of increase in property prices makes property an attractive investment option in the light of low bank term deposit rates and the current volatility of the share market. Investors are using the increased value of property they already own as security to borrow more at historically low interest rates. Of course there is a snowball effect at work here. The higher the returns, the more people flock to invest in property, and so prices go even higher. Within all this frenzy, there are people making terrible investment mistakes. The problem is, the mistakes will only become evident when the property market cools, which it will inevitably do.
Investing in property requires a number of different skill sets and thorough research. Understanding the financial aspects, including tax implications, is critical. Returns from property come from both capital gain and net income. The trick is to find a property that will provide capital gain as well as sufficient rental income to cover borrowing costs, rates, insurance, property management fees and maintenance. Some properties are great investments; some are not. Successful investors know how to spot the good ones. When the market is going mad, it is easy to make rash decisions which will prove costly later.
If you are planning on investing in property, read as much as you can on the subject. Join your local Property Investors’ Association, attend meetings and get to know other investors. Find out who you can go to for expert advice on the financial, tax and legal aspects of investing. Select a geographic area to focus on based on future expected demand. Before you buy, do your calculations on price, rental income and expenses, including any renovation costs, so you know what the financial implications will be.