What Should You Invest In?

There are a range of property types to consider if making an investment, we review thet types and pros and cons of each

Planning is always the first step for a real estate investor. You’ll outline your overall goals, the strategy you will use to reach them and the budget you have to get started. With that information at hand, you can start looking for good investment properties. But what should you look for? Here, we offer up three questions you might consider.

Should I Get an Established or Brand New Property?

Some investors swear that buying new properties will open the door to higher returns. Others prefer the security offered by established properties. Which should you go for? Here are the things you need to consider with each.

Established Properties

Established properties tend to offer more security because they don’t experience the same level of price fluctuations as newer properties do. You can also make improvements to an established property, which increases its value. Real estate agents also understand the prices of established properties. They’ll have seen what similar properties have sold for and may even have a price history for the property you’re looking to buy. There’s less chance of you buying something that doesn’t suit your needs. Furthermore, you often gain access to a portion of land when you buy an established property. This land offers another opportunity to make money. In fact, some people have managed to reduce the cost of their investments through subdivision of the land they receive with their properties. This is when they sell off a portion of the land, often to a property developer. It’s not all good news, though. Established properties suffer wear and tear, which you’re going to have to spend money on fixing. You may also find it’s more difficult to rent such properties out to tenants who want all the mod-cons. Finally, you often can’t claim as much depreciation because of the age of the property’s assets.

New Properties

A new property offers an instant advantage with regard to maintenance. As long as the builders do their jobs well, you shouldn’t have to worry about getting things fixed up. Furthermore, the builder’s insurance should cover any structural issues you discover after making the purchase. You may enjoy higher tenant demand, especially because new properties have modern design features. They usually offer more light and space, which means you can charge higher rents to tenants. There’s a tax advantage as well. You’ll be able to claim depreciation for the property’s assets from the beginning of their lifecycle. This can have a major effect on your cash flow. However, you have to deal with price fluctuations. There’s a chance that you’ll pay more than the property is worth. This is because real estate agents don’t have enough information available to them. This will affect capital growth, often making it more difficult to develop a positive cash flow. Also, you may find demand is not as high as you’d like it to be if you buy a new property that is part of a larger development. An abundance of similar types of property going on the market at the same time could lower the property value. Need a home loan?UNO. The new way to get a better deal. Get Started #### Off the Plan You have a third option. Buying off the plan means you buy the property before it’s been built. You receive the same benefits you get with a new property, plus a few others besides. However, there’s also more risk involved with an off the plan purchase. Let’s look at the benefits first. You’ll usually pay less stamp duty on the property, with some states even waiving the fee entirely. Off the plan may also prove useful to overseas investors who can’t buy established properties. This is because the Foreign Investment Review Board (FIRB) allows off the plan purchases for overseas buyers. You can also avoid having to pay the deposit straight away. However, this requires the developer to be okay with accepting a deposit bond. As it may take several years for construction to conclude, the use of a deposit bond offers you time to save money. Or, you could use your money for something else in the short term. Unfortunately, that long waiting period can also have negative effects. If the property market falters after you make your purchase, you may find the property is worth less than you paid for it. Remember that you can’t carry out a valuation on a property that doesn’t exist yet. This means you’re using estimates to make your decisions. Finally, you have to consider the possibility that construction won’t start at all. Many real estate developers won’t move forward with a project if they don’t make enough off the plan sales before they begin building. You’ll get your money back, but you’ll have wasted your time and may have missed out on other opportunities.

Should I Buy a Regional or City Property?

Once you know the age of the property you want to buy, you have to start thinking about location. Rural properties tend to provide little value for investors, unless they’re moving into the agricultural space. This means your choice boils down to regional or city properties.

Regional Properties

A lot of investors avoid regional properties. They see them as too reliant on the presence of local industry, which means they can only attract tenants who can work in the region. Data also shows that it’s harder to attract tenants. Plus, you will usually experience a slower rate of capital growth. However, there are some advantages. For one, you’ll usually spend much less on a regional property than you would a city property. The only exception to this is if the property is near a beach. You could also do well if you manage to buy a regional property just before an influx of people into an area. This requires knowledge of population flows, so you may need to consult with a real estate agent who understands the area.

City Properties

Current data suggests that over two-thirds of Australians live in a city, which makes city properties an attractive proposition for investors. Demand tends to be high, especially when you take immigration into account. You’ll also usually enjoy a faster and more consistent rate of capital growth. However, that doesn’t come without its problems. High capital growth means your property will cost tenants more. As a result, you may alienate part of the market without intending to. Apartment blocks and other high-density options lower costs, but may not provide the biggest return on investment. Furthermore, you’ll need to understand negative gearing, as this is an issue for the majority of city properties. You may not enjoy a positive cash flow for a long time. Speak to a tax advisor to discover how this will affect you.

Should I Buy a Unit or a House?

Once you have a location nailed down, you need to think about the type of property you want to invest in. Usually, your choice will come down to an apartment unit or a house.

Units

Increasingly popular in city areas, units have the advantage of generating high rental income for a lower investment than houses. In fact, the rent you can command may equal that for a house, assuming your unit is in a desirable location. You’ll also find that demand stays consistent for units, as young people prefer them to houses. Those looking to rent for the first time often look toward units, especially if they offer access to the city. Furthermore, many tenants prefer the added amenities you can provide with the right unit. If your apartment block has a gym or swimming pool, you can ask for more rent. However, the situation changes when you buy units in regional areas. Capital growth slows down, and demand may decrease. You’ll also have to become part of the “body corporate” that oversees the apartment block. This means making regular financial contributions, which usually go toward the upkeep of the block’s communal areas. This also means you have less control over the property. You’ll often need approval from the body corporate if you want to make changes to your unit. Finally, you may find it difficult to secure a home loan for a unit. As a result, they’re often the domain of real estate investors who have built their portfolios and have strong asset positions.

Houses

Reliability is the most important thing you receive when you invest in a house. They tend to enjoy long-term capital growth, especially in areas of high demand. This makes lenders more likely to offer home loan products to house buyers when compared to those who want to buy units. Furthermore, you’ll have more control over a house than you will with a unit. You won’t have to answer to a body corporate if you want to do something with the property. They are not without their downsides, though. Houses are usually larger than units, which means you may find yourself spending more on maintenance. Also, you have to take the age of the property into account. An old house may require extensive renovation work before it can attract tenants.

What to Do Next

There’s a lot you need to consider before you invest in a property. Take your time with the decision as rushing could lead to a bad investment. We also recommend you:

Book Call Now

UNO home loans

Need help with your home loan?

UNO Brokers are available night and day for a quick review or your situation and bring expertise that will support better decision making that will save you time and money. Book in a quick call when it suits your busy schedule

Get Started

Related Articles

TESTIMONIALS

What our customers are saying

Mike Vincent
April 10, 2024
Andrew is the best broker I have worked with and one of the few people who understands the investment journey from both a personal and professional standpoint. Andrew is an asset to anyone from a first home buyer to a seasoned investor.
Read more
Yu Su
April 9, 2024
Amy was very help and quick respond when I have questions. Really recommended.
Read more
John Cahill
March 7, 2024
Scott Wilkinson was my broker last year when I sought finance for a new property investment and refinance for my property port folio. He was an absolute delight to work with. He was always professional, on time and always available to talk at a moment's notice to discuss my credit options and give well considered advice; usually this was very much after-hours due to my work commitments during the day. He was always happy to talk. I had not used a mortgage broker in a long time opting to do the re-financing myself. This was primarily due to disappointing experiences I'd had with mortgage brokers in the past. However with the increasing complex nature of dealing with credit providers, I could see that I needed a good advocate to act on my behalf for this particular refinance. In all honesty I did not hold much hope that in the current credit environment I would be able to secure the finance I required for the new property investment I was wishing to secure. Scott found a way however and was able to secure the finance along with the refinance of my portfolio. I have since referred friends to Scott and I know they have been very happy with his work. He is ideal for property investors who have busy day-jobs and need someone who understands property investment strategy and is able to tailor credit advice and options to their needs. Scott provides this advice and information in a way that is clear and concise. He kept me up to date continually during the application process. He made what could have been a very stressful and frustrating process easy and straightforward. I could not recommend Scott and the team at UNO Home Loans more highly. They are all a delight.
Read more
Sally Mackenzie
February 19, 2024
We chose Uno Home Loans from their impressive web site knowing we were going to find it hard, on many fronts, to qualify for a home loan. We were incredibly fortunate to be assigned Mike Parsons as right from the get-go, despite the complexities, he hit the ground running for us. He was incredibly knowledgeable, with years of experience but what was immediately apparent and impressive was that he was totally invested in getting us over the line, doing absolutely everything possible, including working around the clock. Despite it being a relatively small loan in the order of things, Mike never missed a beat, getting docs ready, following up and answering every request from the proposed funder immediately. He kept us informed on progress the minute anything happened, and again if anything needed to be done, he was right on it. In short, we highly recommend Uno, and Mike, knowing what a remarkable job he did, over many weeks, to get us our loan. He got us a great deal, with far better rates than we expected, so we couldn't be happier. In fact, without doubt, you'd be hard pressed to find a more personable, sharp, hard working, dedicated professional who clearly prides himself on getting his customers standout results.
Read more
Rod
February 13, 2024
Scott and his team were just A-mazing. We felt supported through the whole process with the greatest quality and care. Every question answered right in time, or even before we asked. The process was smooth and we got the best outcomes we could have wished for.
Read more
Angela Biddle
February 6, 2024
Our mortgage recently came up for renewal, and with interest rates skyrocketing we were looking for ways to minimise the impact. Michael and his team were proactive and attentive. Michael spent time with us to understand our circumstances. He found mortgage options that worked with our current financial situation and longer investment plans. He presented clear options, providing guidance where needed. He and his team were helpful and responsive - streamlining the process and keeping us updated through the negotiations. In the end, Uno did the heavy lifting and secured a significantly better rate than our current bank offered, all with friendly, personal service. We would highly recommend UNO Home Loans.
Read more
Fotis Bikas
January 15, 2024
I cannot help but congratulate Scott Wilkinson of UNO Home Loans for being an absolute credit to both his company and the entire loans industry. Scott is a truly rare gem of a broker in that he will not only go the extra mile to achieve for each customer the very best deal, but his knowledge of all and sundry within the industry is unsurpassed (you will see what I mean if you speak to him). Additionally, Scott has a clear passion for imparting his wealth of information with each customer, whereas the conversation with most other brokers would simply be over if they could not get you the best deal. For me, Scott Wilkinson of UNO Home Loans stands head and shoulders above the competition and I feel privileged to benefit both from his expertise and professionalism whenever it is time for a refinance or new loan.
Read more
Tomoharu Matsui
January 11, 2024
Michael Parsons helped me a lot when it's difficult to establish my capabilities in loan.
Read more
Gillian Kearon
January 9, 2024
I highly recommend Mike Parsons as a mortgage broker. I couldn't fault the service provided by UNO. Thanks Mike!
Read more
Taner T
December 20, 2023
Thank you Eren Tan for the amazing service and support. Our Loan was a little tricky and complex for other lenders but Eren managed to get it over the line in record time. His professionalism and dedication to our needs was exceptional. If you need a Loan no matter how complex your situation, make sure you contact Eren at UNO Home Loans.
Read more
Karaipu Brown
December 20, 2023
Buying & selling a house at the same time is very stressful but Scott Wilkinson from UNO home loans made sure we knew what was happening & took most of the stress away. He always kept us up to date and if we had a concern or wanted clarification on something we were able to call him, if he didn’t know the answer straight away he will find out and contact us back.. now we are enjoying our new house and turning it into a home :)
Read more
Chris Anderson
December 18, 2023
Just completed my first loan with UNO which was so much easier than with other other brokers I have used in the past. Our broker MIKE PARSONS always had time for me and broke things down for me in the simplest of terms and was very patient with my silly questions and my constant changing of plans. I wish I had used them in the past as I wouldn't be in the situation I'm in now. Can't recommend them highly enough. Thanks UNO and Thanks MIKE 😊
Read more