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Real estate is one of the most lucrative sectors Australians can invest in. property values have shot upwards in Australia for several years. Though the market is slowly cooling off, the returns on real estate investments are poised to remain high for the years to come. If you are a regular income earner looking to invest, real estate is a great place to start.

Residential property in Australia has consistently remained a competitive market in modern years. Investing in residential property is a great way to diversify a cash-based portfolio and earn passive income from rentals. Here are several things you should consider before becoming a residential property investor:

Consider the Down Payment

Perhaps the most important factor to consider before you begin is the amount of debt you would owe if you take out a mortgage to buy up secondary property. You would need to put down at least 20 percent as the down payment. You can offset the actual mortgage with rental income. However, if it takes a while to find a tenant, you will have to pay the mortgage on your own, possibly in addition to the mortgage on your existing home.

Your income should be able to support a second mortgage before you invest in residential property. Don’t count on the rental income to supplement everything just yet.

Research Real Estate Deals

The value of the investment would largely hinge on getting a great deal on the property. Therefore, before making the purchase, research and spend time looking at great house and land packages in Mildura, or the local neighbourhood you have an eye on. Use home price guides to compare prices. You would need to calculate current values against the potential future value of the property.

Calculate Future Rental Value of a Property

This is another crucial aspect of making sure that you are making the right investment. The future rental or lease income should be the main deciding factor when purchasing a new property, unless you have other plans for it. Doing this calculation is rather intricate. However, you can determine how valuable the rental would be by considering the demographics and development of the neighbourhood.

For example, if the neighbourhood growing with new people moving in and new businesses going up every year? A growing neighbourhood would have great future demand for rental properties.

Understand the Neighbourhoods

The neighbourhood is crucial for earning money from residential property investments. Rentals work best in urban areas, where housing prices are too high for regular income earners to afford. In the suburbs, plan to buy and sell for a higher value rather than buy and rent. You would need to do a considerable amount of research to understand which neighbourhoods are up and coming and which are dying. Refer to local papers, blogs, online forums, local residents and realtors to understand whether a neighbourhood is worth investing in.

Be Aware of Zoning Regulations

If you plan on developing the residential property even further, then you would need to be aware of local rules and zoning regulations. Don’t forget to hire an expert to understand the regulatory framework in the area before you invest in any type of property.

Follow the above suggestions to make sure your investment can reap profits in the future.


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