By investing in property, you can add to your portfolio with a commodity that’s stable and likely to increase in value. But can you afford to act now?
For many Australians who have the means, investing in property is a great move for one’s financial future. Buying real estate represents a way to add to your portfolio with something that’s a stable source of value. Because the population is increasing, demand for housing is sure to stay strong nationwide, and whatever property you own is likely to keep getting more valuable over time.
That doesn’t mean buying real estate is a good idea for everyone, necessarily. If you start buying properties before you can afford them, you may get yourself into serious financial trouble. Take a close look at where you stand before jumping on an opportunity that might be ill-timed.
The horror stories are out there
If you start investing in property before you can afford it, you might be heading for hardship. News.com.au reported on an example of this – Denny Jones, a 31-year-old graphic designer in Sydney, began investing at 21 when he wasn’t ready.
“I was living at home with my parents and I was noticing the average home or unit and how much prices were increasing,” Mr Jones said. “So I did the numbers and just thought I needed to get ahead of the market.”
The problem was he couldn’t afford the mortgage repayments. Mr Jones was collecting just $275 per week in rent on the property he had bought, but was paying $150 more than that servicing his mortgage. He began losing money, not making it, and at an alarming rate.
Steer clear of mistaken investments
As exciting as property investment can be, you want to avoid making a misstep like the one above. This is why Michael Yardney’s Property Update cautions that trying to become an overnight millionaire rather than being patient is one of the biggest mistakes an investor can make. You don’t want to overextend your savings when you invest. Instead of jumping at the first buying opportunity you see, plan carefully. Look for proven, high-performing properties and make sure you can get a loan that’s affordable compared to the rent you’ll be collecting.
Investing in property is a little different from buying your own home – the risks aren’t the same, and neither are the rewards. If you want to start investing without dipping into your savings, you’ll need to get set up with the right loan first.
If you are looking to buy property, please give us a call, it can really help to run through everything with a trusted financial adviser and mortgage broker. We can also refer you to award winner buyers advocates to make sure your property purchase is a sound one.