Canberra Property Investment: 5 Key Things to Consider When Buying Investment Property
Canberra is Australia’s capital and the largest inland city in the country. People generally look for investment options that can increase their wealth manifold in places like Canberra, as it holds tremendous potential.
If you want to make a significant profit on your investment or generate an income monthly, property investment is a good option. This is for people who want to get higher returns on their investments through monthly rentals or lump sums.
What Is An Investment Property?
An investment property is a real estate asset that you can purchase with the intention of generating income. You can also appreciate this asset value over time. The investment properties can include rental properties and properties held for resale and used as vacation homes.
These investment properties are typically purchased to generate a return on investment. It can be rental income or capital gain.
Things You Must Consider Before Buying An Investment
Investment can be a powerful tool, especially when you are trying to build your wealth and achieve your financial goals. However, it is also necessary to approach it with careful consideration. This can help you to minimize the risk while maximizing the return.
If you plan to invest in property in Canberra, these are five things you need to consider.
Is Real Estate Investment Suitable for You?
As per recent data, the total population of Canberra is around 196,037. Males constitute 49.2% of the total population, while females constitute 50.8% of the total population.
Real estate investment comes with risks, but the chances of good profits in this industry are also immense.
Before buying an investment property, it is vital to consider factors like securing a mortgage, making a budget for operational costs, finding a reliable tenant who will pay rent on time, and securing a maintenance fund.
As per recent data, Canberra’s residential property price index is around 163.1, and there has been a 25.2% rise in the prices over the years. So, in simple words, buying an investment property in Canberra can be a good decision if real estate prices continue to rise in the near future.
Your Financial Situation
As per recent data, the median household weekly income in Canberra is around $2,087. Therefore, when buying an investment property, you need to determine whether your income is enough to secure the mortgage necessary to purchase the investment property in Canberra.
Here are some questions you need to ask yourself.
- Do you have a high debt-to-income ratio?
- How much monthly installment can you afford?
If your debt-to-income ratio is below 32%, most mortgage lenders will be happy to provide you with a mortgage loan. However, an investment property in Canberra does not qualify for mortgage insurance, so you need to make a higher down payment for the loan.
Property Management
As per recent data, the total number of dwellings in Canberra is around 82,693. Property management is a significant concern as it can significantly drain out your savings.
It is, therefore, essential to consider property management factors when buying any kind of real estate. When you are living in a house, you don’t need unique visits to find issues with the drainage, plumbing, or any cases of breakage or damage that need immediate repairs.
When buying an investment property, ask yourself whether you have enough time and money for property management. You need to deal with the daily management of the property during the initial period, which includes finding and vetting potential clients and handling maintenance issues that arise.
Location
Canberra has seven districts, and each district is divided between eight to 25 suburbs. However, the average number of suburbs in districts is around 18.
As a result, investment property prices vary, and prices are expected to be higher in the best Canberra neighborhoods like Forrest, Hawker, Red Hill, Amaroo, Braddon, Barton, Lyons, and many more.
You need to search for investment properties in the best neighborhoods while considering the budgetary limits for the purchase.
Follow The 1% Rule
Investment experts mention you should always apply the 1% rule when buying an investment property. The 1% rule says the monthly rent earned from the investment property should not be less than 1% of the property price.
To sum up, these are a few things to consider when buying investment property in Canberra.
Buying Investment Properties: The Pros And Cons
The idea of investing in real estate might seem a lucrative way to build wealth. However, before you actually start investing, it is crucial to weigh the pros and cons. As a result, you will be able to make your decisions carefully.
In this section, we will discuss the advantages and disadvantages of buying investment properties. Read on…
| Advantages of buying investment properties | Investment properties provide you with a steady rental income, and you can further cover your ownership cost. |
| Over time, real estate values can appreciate further leading to capital gains. | |
| Investment properties are unlike stocks or bonds. You can actually touch and see this tangible asset. | |
| Buying an investment property can offer you a tax advantage. This includes deductions for mortgage interests, depreciation, and property taxes. |
| Disadvantages of buying investment properties | Purchasing an investment property involves a significant amount of upfront costs. Thus, it includes closing costs, a down payment, and other potential renovation expenses. |
| The investment property may remain vacant for a long time. This can have a huge impact on your income and profitability. | |
| If you decide to rent out your investment property, then dealing with tenants can create challenges, such as finding reliable tenants or handling potential disputes. | |
| As you know, the real estate market can be volatile, and property value can easily fluctuate. This can have a potential impact on your investment returns. |
The Process Of Buying Investment Property
When you are planning to buy an investment, you can follow these steps:
- You must ensure to research and identify your investment goals, budget, and the desired property types.
- Then, you can secure financing through mortgages and other means.
- After that, you can start finding a suitable property based on your own criteria.
- Once you find a suitable home, you can conduct a thorough inspection and research to assess the condition of the property and its potential.
- You can further negotiate the purchase based on terms and prices.
- Once the negotiation is over, you can further complete the transaction and take ownership.
Always remember to consult with a real estate expert and financial advisors. They can help you to find the best deals and navigate you through the entire process.
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