Building Wealth and Security With Residential Real Estate

For many people investing is considered risky, though when asked if they would like to own another property apart from the family home, the answer almost universally is a resounding YES.

Why is investment in Real Estate seen so differently from shares, superannuation or starting a small business. The answer is simple, Security.

Residential Real Estate is the only asset class in Australia where you can borrow up to 100% (or more) of the value of the property.

The banks aren't silly, they won't lend you $100,000 to go and buy shares (not even if its in their own stock). The will however happily lend you this amount of money, provided you can prove you can pay the loan back and provided the property passes an independent property valuation.

So what is the criteria you should use when looking to buy an investment property.

1.The value of the property will increase over time - this is called growth.

Traditionally in Australia property growth on average runs at about 10.2% per annum, this means that the price of a property will double every 7 or so years. You can likely look at your own home right now. If you have lived in the same home for 6 or 7 years you will find the value of your home has doubled or very close to it. This is especially true for Australia's capital cities.

2.You will have tenants who will help you pay for and hold on to your property.

In property investment parlance the income you receive for renting your investment property is called "yield". The yield you can expect from your property investment will vary depending on a wide range of conditions, though a 3-5% return should be expected. (Eg. A Home Valued at 300,000 should generate a rental yield of $15,000 per year - about $288 per week)

The idea property is located where people like to live, this sounds a little obvious though common sense sometimes is not so common.

So the basic "Due Diligence" check list should include:

When looking to buy an investment property whether its your first or your thirty first, the most important thing to take into consideration is your customer, the good people you want to have help you pay for your investment, how much can they afford to pay each week, where do they want to live, what kind of home do they want to live in. Answer all these questions correctly with your property and your well on your way to a successful investment.