Investing in property can be financially rewarding as it is the safest way to increase or protect your wealth. It allows you to afford a better lifestyle and retire earlier. However, it is a long game of business and you may not see instant profits. The real estate investment requires serious time and efforts to build and you shouldn’t be considering it if you are looking to get rich quick.
To give you some of the insights, our property advisor in Melbourne would like you to read this article before you start your journey of property investment.
High Cost of Buying Property
There is not only a cost of investment property which you will have to pay, there are also stamp duty, settlement fees, and maybe even pest and building inspection fees.
Stamp duty is a state-based tax and it varies from each state or territory’s individual model. The higher the property’s cost, the higher the stamp duty will be. You’ll have to take into account all the costs of buying an investment property so you can sell it with a final profit margin.
High Cost of Selling
If you are selling your investment property and hiring a real estate agent to handle the process, you will have to pay them a fee. The fees also vary from company to company but it usually falls around 2% of the selling price, and in some cases higher.
So, if your property is selling at $800,000, you will have to pay $16,000 to the selling agent. You will also need to pay the tax on any profit you make on the buying and selling of residential property. All these costs must be kept in the account to determine your profit margin.
Taking Benefit of Compound Interest Growth
Holding your property for a longer period can leave you with a healthy profit and capital growth can help you achieve that. The property’s value over time will increase and the gains will be compounded, means you will get interest on interest.
Picking Strategy: Timing the Market Vs Time in the Market
As most of the businesses, property investment is also about perfect timings. There’s not a season or any specific time of the year when you are sure that you will get profit on your investment. The property market rise and fall as per the demand and supply. It typically runs in cycles and the prices won’t linearly hit the peak. The market will face ups and downs over time.
Trying to buy an investment property at the bottom of the cycle and waiting to sell it at the top of a cycle might not be a smart idea. Timing a market can get tough as it is hard to predict the highs and lows of the market. To break even or to make a certain profit means that the property’s price has to rise at a significant pace in a certain period.
Rather than trying to time the market, it can be better to keep eyes on the bigger picture and have the holding power to see how things unfold over time and learn from the experience. Focus on the properties which show growth in value over a longer period while keeping in mind that there can be low times too.
To be successful in property investment, you must have the sheer knowledge of the current property market and decision making power to get profitable results. If you need professional assistance in this journey, reach out to our expert financial advisor in Melbourne at 10 Properties in 10 Years. We would love to guide you all through the complex process of property investment and will make sure you reach your goals. To find out more about our services, contact us at +61 452 238 490 or leave us a message at [email protected].
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