Buying an investment property sounds like a relatively simple proposition.<\/strong><\/p>\n But how do you know when you\u2019re really ready to invest?<\/span><\/p>\n According to the experts, there are some key things you should have in place before you consider yourself ready to make the leap.<\/span><\/p>\n Wakelin Property Advisory associate director Jarrod McCabe says having a good level of equity built up in your home may mean you\u2019re in a position to buy an investment property.<\/p>\n \u201cLook at the amount of equity that perhaps you\u2019ve got in your current home,\u201d McCabe says.<\/span><\/p>\n \u201cIf you\u2019re at a point where you\u2019re fairly comfortable with making your mortgage<\/a> repayments and you\u2019ve built up a fair amount of equity, you can perhaps then utilise that to open yourself up to the investment market.\u201d<\/span><\/p>\n If you don\u2019t own a home but have a solid amount of surplus cash, you could also be ready to dive in.<\/span><\/p>\n McCabe says a good, entry level investment-grade property will cost you around $500,000, and with banks currently tightening their purse strings, you may need about $100,000 in cash or equity before you\u2019ll be able to borrow the rest.<\/span><\/p>\n Make sure you get the right advice before you dive into investment. Picture: realestate.com.au<\/p>\n<\/div>\n \u201cIn the current market you really typically need close to 20% in cash savings or equity built up \u2013\u00a0of whatever you\u2019re looking to borrow \u2013\u00a0because it\u2019s becoming harder and harder to get borrowings in excess of that,\u201d he says.<\/span><\/p>\n \u201cWe indicate that the property needs to be around $500,000 as an entry point to get a good quality investment, otherwise you\u2019d be compromising on the type of property that you could potentially buy.\u201d<\/span><\/p>\n Have you done your research? <\/span><\/p>\n That means both research on the property market you want to buy into, and also on your own financial situation.<\/span><\/p>\n Metropole Property CEO Michael Yardney says you\u2019ll know if you\u2019re in a position to invest once you drill deep down into your finances. <\/span><\/p>\n \u201cMake yourself attractive to the banks. Currently we\u2019re in a credit squeeze \u2013 APRA\u2019s restrictions on the banks means they\u2019re tightening the screws and making it much harder for investors to get loans<\/a>,\u201d Yardney says.<\/span><\/p>\n \u201cSo you\u2019ve got to look at things like, \u2018How steady is your employment? What are your living arrangements \u2013\u00a0are they stable? Have I got any bad loans or bad credit debt?\u2019\u201d<\/span><\/p>\n Make sure you can afford all of the costs linked to an investment property. Picture: Kate Hunter<\/p>\n<\/div>\n McCabe says you also need to have a deep understanding of what the costs associated with your investment will be.<\/span><\/p>\n \u201cIt\u2019s not just (knowing) what sort of mortgage repayments you\u2019re going to have to make, but also understanding some of the other costs that will be associated with it,\u201d he says.<\/span><\/p>\n \u201cWhat are the negative gearing benefits that you\u2019ll get out of the property, but also what are the other costs that you\u2019re going to need to take into account? It may well be building insurance if you\u2019re purchasing a house. If it\u2019s an apartment, then there\u2019ll be owner\u2019s corporation fees. There\u2019s obviously rates that you\u2019ll need to be paying \u2013\u00a0council and water.\u201d<\/span><\/p>\n McCabe suggests basing your loan calculations on an interest rate that\u2019s around 2% higher than the current rate, to provide a good guide as to whether you can afford to invest.<\/span><\/p>\n \u201cYou don\u2019t want to be stretching to do something in the current market and then have the market levels change and all of a sudden you can\u2019t afford to sustain it. Because they will change at some point in time.\u201d<\/span><\/p>\n Both McCabe and Yardney say you\u2019re only ready to be an investor once you\u2019re ready to commit yourself to the long haul.<\/span><\/p>\n Yardney says most property investors just aren\u2019t prepared to give their investment the time it needs.<\/span><\/p>\n \u201cMost property investors fail. 50% of people who get into real estate<\/a> as an investment sell up within the first five years,\u201d he says.<\/span><\/p>\n \u201cMost people never get the financial independence they expect because they don\u2019t build a big enough asset base.\u201d<\/span><\/p>\n McCabe says investing in a property should be at least a 10-year proposition.<\/span><\/p>\n \u201cIt needs to be a long-term investment strategy<\/a>. There\u2019s no point in buying property and then selling it within five years or so,\u201d he says.<\/span><\/p>\n \u201cIt\u2019s an expensive exercise, both from a purchasing and a selling perspective, and you have to take all of those costs into account. If you don\u2019t give it a 10-year period, then you\u2019re not giving the property a good opportunity to perform.\u201d<\/span><\/p>\n \u00a0<\/span><\/p>\n \u00a0<\/span><\/p>\n \u00a0<\/span><\/p>\n
\n <\/p><\/div>\n Realestate.com.au <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"You\u2019ve got good equity<\/span><\/h2>\n
You\u2019re cashed up\u00a0<\/span><\/h2>\n
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<\/p>\nYour numbers stack up<\/span><\/h2>\n
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<\/p>\nYou\u2019re prepared to be patient<\/span><\/h2>\n