Before making any property investment, it is essential you have as much accurate information as possible, to ensure you make the best decision for your situation. Property information is freely available from a wide range of sources. What a property was originally purchased for, what a suburb is worth, upfront costs, and interest rates is all at your fingertips. There are subscriptions available for free, others you can get for a small yearly investment, or you can even copy and paste different information from multiple sources to collate your own data. If this may be overwhelming, you may even like to engage a buyer’s agent to assist you.
The challenge is knowing which portals to use, and which have accurate information. Having the information is one thing, however you will also need to learn how to recognize inconsistencies and flaws. The best way to do this is through a bit of investigating. If you uncover any conflicting or contradictory information, that’s a red flag that you need to do more of your own research.
It’s important that the source you use is trusted. Social media, tabloid news and current affairs programs are never experts on the industry, they are a source for general information.
There is no such thing as a “risk-free” investment or “guaranteed returns”. Whatever you place your money in is a gamble. While there are predictions, trends and key indicators, no one actually knows what the future will hold or what possible quirks will negatively impact your stakes. Rises and falls are both expected and should be anticipated. If you can weather the storm, long-term investments usually come with a profit.
Minimise Property Investment Risk
One of the ways to safeguard against unnecessary risk is to invest in an area you feel familiar with, or seek advice from an experienced, independent advisor who understands your financial position and goals.
It would be a wonderful world if everyone was genuine about what they were selling, unfortunately, that isn’t the case, which was brought to light in a recent Four Corners investigation aired on the 21st of August 2017 Betting on the House.
One of the Australian’s interviewed on the segment, Carlene Stafford, was targeted by an unsolicited sales call regarding property investment. The caller used aggressive sales techniques which were compounded by the actions of the investment broker to entice Carlene into the purchase of a $445,000 investment property, with the dream of financial freedom in her retirement. The broker fraudulently filled in the customer details on the loan application, omitting that Carlene was soon to be retired. Even though this form was not correctly completed, Carlene signed it. This information was then sent to the bank and her loan was approved. Little did Carlene know that from the bank’s’ estimates she only had less than $10 a month after repayments and expenses. Carlene was unable to cover the repayments and was forced to sell her family home.
While the stories of people struggling to repay their mortgage are heartbreaking, it’s not, as the program tried to suggest, an indication of a change in property stability. It is simply a case of a few people who balanced their finances on the very edge of their capacity or were not in a position to make a long-term financial commitment. Banks are careful with the information they receive and more careful still about how much they lend. In fact, I know of many mortgage brokers who act with integrity and do what’s right for their client. Unfortunately, it is the small minority which tarnish the reputation of the finance industry.
Consider Your Options Before Investing In Property
It is imperative, for our own emotional and financial safety, that we each carefully consider our circumstances and know exactly what we are getting into before we commit ourselves to large debt. Spending beyond our means is never a good bet to lay. Be sure that any purchase you make, either for a home or an investment property, is sound and comfortably affordable.
When you are talking about loans of big quantities, it’s always worth doing thorough research. Buying an investment property over the phone is a high risk, especially if you have no prior knowledge about lending, investments or the property you are purchasing.
If you are genuinely interested in becoming a property owner, hunt around and compare what is available on the market, and seek advice from an experienced mortgage broker. Be exact with the details you provide your broker, particularly on your personal circumstances that impact your immediate or long-term financial situation, i.e. that you are preparing to retire, that you are looking to be a stay at home mum, or that your job contract is under review in six months.
Owning a property is not as important as your emotional, physical and financial health. If owning a property is a high value to you, make sure the property is one you can comfortably afford, even if it doesn’t have all the modern features you might desire. Over time, as your repayments and savings improve you can look at renovations or leverage the property to upgrade to a better home.
Make sure you factor in future interest rate rises and that you have the ability to service the loan if there is a drop in property prices or a temporary change in your employment. If you panic and sell during a downturn, you will lose money and bring a tremendous amount of stress to your life. Riding the storm will allow you to make a long-term gain on your investment.
Conducting thorough research and taking into consideration your immediate and future plans will not only provide you with peace of mind, however, you will be making an informed investment decision that you will feel confident in.
Luke Assigal, Managing Director
Parley Property Advisory