Buying investment property

Buying an investment property is a major decision for the majority of Australians, with average house prices in Australia hovering between $450 and $500 thousand dollars and unit prices between $320 and $380 thousand dollars in early 2009 it is obvious this purchase involves more money than most Australians will spend on any other purchase.

So the stakes are high and the fact is for most investors the majority of this money is going to be borrowed money so it is money that you are going to be required to pay back and it is money that while you are using it you are going to paying interest on.

Here we have discovered the major expense for most potential buyers of investment properties, Interest to the bank, now while be great after speaking to your mortgage broker or if you still have one bank manager hearing you that they love you so much you can borrow x amount for your potential investment property, please don't forget you have to pay it back and the current low interest rates could with in a short period of time start going back up again.

Buying investment properties

No 1 on buying investment property is to plan in advance, write out clearly what your goals are for this investment, things to include are timeframe's , budgets you are working with in this includes the initial investment and they what you expect to see as a return each year or more than likely how much you are willing to contribute on a yearly basis

Thing to also including in the planning or goal stage are what would be your exit strategy and this should be to a certain degree adaptable to market conditions. For example buying investment properties now in this current negative economic cycle it is unrealistic to think you will see huge capital growth.

Buying an investment property comes with its share of good and bad points, what is important is to try to minimize the downsides of this type of investment and make sure get a positive return.

The big capital growth that Australian real estate has seen over the last 15 - 20 years may or may not be there , in fact it is more than likely that we won't see any where near this sort of capital growth so you should budget for this.

Although it is not pleasant to report on bear in mind recently in the USA particularly Californian residents have seen property values fall as much as 60% in certain areas, while we wouldn't be expecting falls like that here in Australia never the less Australian residential property prices are very expensive in comparison to wage levels so we could well be in line for a market correction.

You have to plan a better exit strategy than i will sell the property when i retire and make money from the capital growth, but the up side of the current market downturn is that with low interest rates and relative high rental returns you may be able to buy an investment property that generates a positive cash return.

This mean the rate of rent more than covers any out goings or expenses on the property this is what is referred to as positive cash flow, generally this of course will be determined by how much finance you had to borrow when you first bought the investment properties.

As with any investment the key is in the planning, failing to plan is planning to fail, and as there are generally such large sums of money involved it is certainly worth taking the time to map out and plan your purchase when you are purchasing any real estate and buying any investment properties.

please see our selling investment properties page.

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