How to be successful in the current property market

The Australian property market has increasingly become a hard nut to crack. Year on year, property value changes have become very distinct between different states. And for a buyer to be successful, it now requires a little bit of fresh thinking.

All too often, people complain that they’ll never be able to break into the market because it’s just so expensive to buy a house in their neighbourhood. Others dream of property investment, but the idea of another $800,000 mortgage on top of their own home loan is too much to bear.

Little do they know, but it is not the cost of real estate that is stopping them from cracking the market, but the way they’re thinking about it. Property investment needn’t break the bank.

More importantly, the best investments are not always found in the top-end markets when it comes to rental yield.

One strategy that is growing in popularity among investors on the east coast– both first-time and experienced – is investing in suburbs at the outer edges of our capital cities, where it’s easy to pick up apartments and houses for under $500,000.

Many such markets offer a great investment selection as they not only offer an affordable entry point but also compelling returns.

For example, a 4-bedroom property in Kingston Queensland that sold for $310,000 in April, 2020 brings in a rental income of $365 per week. This equates to a gross annual rental yield of 6.12 per cent.

In comparison, a 2-bedroom cottage in Forest Lodge NSW was sold for $1.8M the same month, and it rents for $750 a week, equivalent to a gross annual rental yield of just 2.17 per cent.

Less expensive property is also much less cash-intensive, making it easier to fund and generally a much lower risk strategy.

For first time buyers, this can be a great way to dip your toes in the property market, while continuing to rent in the location you love. The rental income will go a long way toward paying down your debt and you’ll be building up that much needed equity to get your property investment portfolio or dream home aspirations on track.

The same goes for existing home owners. Just because you can’t afford a house or even a duplex close to the CBD, doesn’t mean you can’t buy an investment property.

And don’t be deterred if you haven’t paid down your family home first. Chances are, if you’ve been making repayments on your mortgage for several years now, you may actually be able to use the equity you have already built up in your home to fund a further purchase.

This is how successful property investors often get ahead, by leveraging one property to buy another on a rolling basis without needing to come up with cash to use as deposit or pay for the cost associated with the purchase.

A caveat, not all properties located in the outer rims will experience the same level of capital growth as a inner city property and buyers need to do their research prior to entering the market.

All things being equal, success in the property market, comes down to thinking outside the square. Whether it’s re-adjusting your buyer expectations or shifting your buying strategy altogether, there’s generally a way.

Tell us: Enjoyed this article? Tell us what other property related topics we should blog on.

And while you’re here, take our mortgage shredder challenge and discover how much you can save on your home and investment loans by using loansHub technology as your personal mortgage manager. To read more insightful articles, click here.

This article does not constitute advice; readers should seek independent and personalised counsel from a trusted adviser that specialises in property, a tax accountant and property design specialist.