If you’re on the fence about investing in property, 2022 could be the year to take the plunge.
Whether you’re looking to improve your long-term financial security or want to create a better lifestyle, now could be a good time to explore the year’s investing strategy.
REA Group, the parent company of realestate.com.au, recently completed a survey on property investors. Its Property Seeker 2020 report identified four types of landlords based on their responses.
These were: ‘freedom finders’, who use capital gains to achieve financial freedom; ‘lifestyle chasers’, who channel returns from property investment into their lifestyle; ‘control seekers’, who build wealth via property for security and returns; and ‘security coveters’, who may not intentionally set out to invest in property and rely on others to guide them through their property investment strategy.
Thinking in these terms, we’ve compiled four key reasons each investor type may have for wanting to invest this year — as well as tips on how they can go about achieving their goals.
Which type of investor are you?
1. Earn capital gains
A good reason to invest in property now is to eventually reap the benefits of capital gains.
A capital growth approach requires purchasing in areas where property prices are likely to increase.
With an entrepreneurial approach to property investment, seek out properties in high-growth markets to maximise profits. Picture: realestate.com.au/buy
Buying a capital growth property requires a keen eye, says Founder and Managing Director of buyer’s agency Aus Property Professionals, Lloyd Edge.
“When looking at [capital growth] properties, I always try to look at places people want to live: where there’s jobs, jobs growth and population growth,” Edge explains.
“I also look at places where there’s a lot of infrastructure being put in by governments. In the past, for example, western Sydney, where they’re putting Badgerys Creek airport, or in Brisbane, where were looking with the Olympics in mind. Regional markets are also very strong if they’ve got hospitals or universities.”
Edge adds that it’s not just about finding the right suburb — you then have to find the right street.
“You need to find a quiet street, maybe near a park or good school catchment zone because that’s what families like to buy into and that will drive growth. Make sure you’re not buying in a flight path or flood zone.”
2. Improve your lifestyle
Another great reason to invest in property is to secure a bit of extra pocket money to enjoy at your leisure.
Whether you want to go on a holiday or spend more time with loved ones, you’ll need an investment strategy focused on freeing up cash.
Generate cash flow
To this end, Edge recommends looking at ‘cheaper’ markets.
“Sydney and Melbourne are expensive and have some of the worst cash flow in the country,” says.
You may love the Bondi lifestyle, but that doesn’t mean it will be the right suburb for you to invest. Picture: Pexels
“You might want to look at a market like Adelaide or Hobart, or some of the regional markets that still have fundamental amenities. (They) may have a little less growth but better cash flow and are less expensive to get in to. This can be perfect for people just starting out.”
Another way to improve your lifestyle is by ‘rentvesting’. That means living in your preferred location, while owning a rental property to pay your rent and get your foot in the property market door.
The goal of this approach is for the rental returns to service your mortgage, while freeing up the rest of your income to spend or save as you wish.
Just remember, when managing rental properties, you need to factor property management costs into your budget. Even if you don’t wish to employ a property manager, you’re still required to pay fees, like council rates and landlord’s insurance.
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3. Spread financial risk
If you’re in the fortunate position of having a sizeable fortune in the bank, but aren’t quite sure what to do with it, property could be one of the most stable investment propositions.
Investing in property can be less risky than investing in stocks and bonds. Picture: realestate.com.au/buy
“I think the main thing about property is that it’s less volatile,” says Edge. “When you do shares, you can buy and sell them overnight. With property, markets don’t go up or down as quickly, so that in itself makes it a bit safer. But like anything, there are risks associated, so you need to do your research.
Edge says it’s always about identifying the right markets.
“The question shouldn’t be ‘should I buy’ but ‘where should I buy’. I think, whenever you’re in a position to buy, you should be looking to buy. It’s about finding the right value, the right property in the current markets and that might mean looking at ‘bridesmaid’ suburbs that haven’t boomed yet.”
4. Get financially secure
The main reason to invest in 2022 is that it could provide you with a leg up on your future.
It may not be your dream home, but it could be an excellent way to get your foot in the door. Picture: realestate.com.au/buy
If you’re unsure of how to go about investing in your first property, seek out a buyer’s agent or start doing your research — ASAP.
“If people are lacking confidence, the best thing they can do is get educated on the markets they’re looking at,” Edge advises. “One of the scariest things about property is not knowing its value, not understanding how real estate agents work and so on.”
The key is understanding the reason you want to get into the property investing game and picking the right strategy, he says.
“Get a good understanding of why you want to invest. Have some goals in place and when you have confidence around that, you can better understand the right kind of investment for you.”
Terri Scheer Insurance Pty Ltd ABN 76 070 874 798 AFSL 218585 acts under authority given to it by Vero Insurance. Before buying this insurance read the PDS and consider whether it is right for you. Go to terrischeer.com.au for a copy. TMD also available. The information is intended to be of a general nature only. Terri Scheer does not accept any legal responsibility for any loss incurred as a result of reliance upon it – please make your own enquiries. This article has been prepared without taking into account your particular objectives, financial situation or needs, so you should consider whether it is appropriate for you before acting on it. The Target Market Determination is also available.