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In uncertain times, many investors shy away from entering the real estate market as the trepidation may be a costly loss. But at the moment many factors add up to make this one of the best times in recent history to purchase an investment property.
Investors make money on real estate in two ways: collecting rent payments and asset appreciation. Because so many people are waiting on the sidelines to buy a home, rental demand is high, allowing owners to establish reasonable rates and keep vacancies low. These stable cash flows have contributed to the second way investors make money, by raising the value of their property.
There are many markets across Australia experiencing strong rental demand, particularly large urban areas like Brisbane. This influx of rent seekers has allowed owners to increase rents over time while also cutting down on the opportunity cost of frequent or long term vacancies.
Because the value of an investment is derived from the cash flow it is able to produce, higher rents mean higher property values. Across major metropolitan markets across Australia, home prices have increased experienced sustained increases in home prices, with Sydney and Melbourne again leading the pack.
For investors who don’t live near or can’t afford the higher prices in big cities, there are also plenty of opportunities to join the market. Expertise in the area is the number one competitive advantage when selecting an investment property so don’t make the mistake of overlooking the potential investments in outlying suburbs.
While in some cases it has become more difficult to find financing for an investment as opposed to your primary residence, one possible solution comes from refinancing the equity in a home in order to purchase a rental unit. As many older homeowners downsize from their longtime residences or refinance these homes at low interest rates, purchasing an investment property has become a great opportunity for anyone looking for a stable source of income in their retirement.
Investment property is the right decision at any age. Younger investors may be interested in making such a purchase in order to add an ancillary source of income to their salary or to build wealth for the future by buying a property that will become more valuable in the future.