Source: Melbourne Investor Feb/March 2007

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Maximise your investment in Residential Property

Source: Melbourne Investor Feb/March 2007

Written by Peter Comben

The Comben Group

Melbourne based developer Peter Comben has been a successful developer for over 20 years. He now spends a portion of his time guiding investors in the tricky business of property development.
 

Maximise your investment in Residential Property

It is universally agreed that well located residential property is a great investment. How can investors maximise their opportunities in today’s market?

Investors have, for a long time, found tried and true properties in and around capital cities. Capital growth in these locations statistically doubles in value in a seven-to-10 year period. Thus, investors who want their properties to grow at a faster rate need to take account of locations where demand way outstrips supply and where capital growth is prominent.

‘Hot spot’ locations investors look at

In a recent article in the Australian newspaper Bernard Salt, well known Australian demographer, pointed to ‘regional locations on the east coast – particularly between Bundaberg and Townsville in Queensland – where the jobs growth and money is at the moment. These areas are being driven by the masses of wealth concentrated in the mining communities’. The article predicted strong growth in towns such as Yeppoon and Bowen, in Central Queensland, and Esperance in southern Western Australia as the resources sector continues to surge. Your own due diligence as an investor is essential, if you are to profit from opportunities available in the market today. It is no good saying I should have invested in Western
Australia three years ago. Rather you need to look for the next potential massive growth location.

Other than finding the right growth location, investors can help to maximise their property portfolios by doing the following:

1. Creating the correct structures to protect their existing assets.

2. Learning how to access the tax benefits they are legally entitled to.

3. Seeking out and learning from mentors who have invested successfully themselves.

4. Accessing the best funding for their investment.

5. Buying investment property from a reputable source. We have all been made more aware of ‘rip offs’ that have occurred and still occur in the market place. It is in the buying of a property that we make our potential profit, so make sure you don’t pay inflated prices. Take responsibility for the due diligence on the Real Estate Agent, the developer, the marketers, even the investor clubs who all offer property at over inflated prices. The purchaser often still pays commissions of five per cent or more and it is not unheard of to find commissions of up to $40,000 being added to the purchase of a $300,000 property. Overpaying for an investment property can put you behind the eight ball from day one and it may take several years to make up the over inflated price,  leaving you unable to access equity to re invest.

6. Confirm the value of your proposed investment property. The lenders valuer is the best person to assess the true value of your property.

7. Rental income is an important element, make sure your property is going to appeal to the market, and that there is an ongoing demand for it.

8. The property cycle can help the investor to find properties poised for accelerated  growth. A great time to buy is at the end of a property slump and the beginning of an upturn. Now three years after the down turn at the end of 2003 in the eastern states of Australia. Melbourne and Brisbane are showing signs of recovery. There are a number of potential growth areas that will significantly outperform the market over the next five years. You need to have a balanced property investment portfolio, with some properties in more traditionally consistent growth locations, and some in the regional growth locations where demand way outstrips supply.

Buying investment property is not a short-term investment strategy; properties need to be  held for at least five years. After that period you will be in a position to know whether to retain the property or not. Advanced property investors end up with a portfolio of  properties they will never sell. In fact, they eventually plan for them to transfer to their children who in turn can benefit from the future income and equity growth.