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CHOOSING THE RIGHT INVESTMENT PROPERTY

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KEYS TO CHOOSING THE RIGHT INVESTMENT PROPERTY

Assessing an investment property’s capacity for capital growth should be a key concern for investors making their first foray into the Melbourne real estate. However, we see some common areas that first-time investors don’t always consider before signing a contract.

One of the first steps towards buying a quality property with the potential for good capital growth is to speak to a real estate agent with a solid reputation and proven track record for handling investment properties. Some of the questions to have in mind about an agent are:

  • Are they registered with the Real Estate Institute of Victoria?
  • Do they have expertise in the local market I want to buy into?
  • Can they explain procedures and contracts in terms I can understand?
  • Does the agency have a property management arm the way Vero does?
  • If so, are they supplying trusted information about about the rental market, local vacancy rates and the type of tenants looking to rent a property in my chosen area?

As well as choosing the right agent, investors need to do their own research on property prices in their chosen suburb/s, taking into consideration rental returns and median prices to avoid overcapitalising on a property. Preparing a detailed breakdown of current and future costs, which many investors fail to take into account, can help you avoid paying too much for a property. Key items to consider include bank loan interest, stamp duty, council rates, mortgage insurance, and body corporate fees.
At Vero we can put you in touch with well-versed financial advisors that can assist in assessing your borrowing capabilities.

Other areas to consider:
  • Focusing on tax benefits or high yields and not on capital growth –buying property that promises good rental yields or tax deductions but has limited prospects for creating wealth and equity is a common trap. Capital growth should be the most important consideration as this equity will accelerate your wealth creation strategies and allow you to create equity and use this to build your portfolio further.
  • Choosing a property that banks won’t lend against – these often include commercial properties, service apartments and properties in certain postcodes or suburbs. If the major banks don’t want to lend against a certain property or will restrict loan to value ratios (LVR’s), these types of properties should be seen as risky and purchased with caution. These restrictions will impact your capital growth potential and resale value.
  • Choosing the wrong ownership structure when buying a property – speak to your accountant to decide whether to buy a property in your name, family trust or self-managed super fund (SMSF) before purchasing. Investors should investigate the process of setting up a family trust or SMSF to decide on the best ownership structure.
WHEN AND WHERE TO BUY

Ask a successful property investor how they made a start in the market and their most common tip would be to seek advice from a knowledgeable real estate agent. At Vero, we can provide first-timers with recommendations on the range of things to consider when navigating the property market.

The old maxim of ‘location, location, location’ particularly applies to investors seeking a good rental return. Choosing the right location with access to desirable features such as public transport, schools, shops, cafes and the beach should be high on the list. Another vital issue to keep in mind is property market cycles, where values rise due to strong demand and market growth or fall in times of oversupply.
One statistic that is not often considered is the average age of residents in a particular area, which may affect the type of property (e.g. townhouse or single-level unit with ease of access) that may provide more consistent rental returns.

Several property sales website, such as propertydata.com.au and onthehouse.com.au, have been established to give consumers an idea of general sales results in a given area and even sales results for a specific address. This information can be a good guide to expected market prices, depending on sales cycles and current demand, and show growth trends as an indicator for future capital growth.

Whether you are a seasoned investor or looking to buy your first investment property, we recommend a guarded and unemotive approach when it comes to your next 'investment grade' property. Working with an experienced real estate agent like Vero Property can eliminate any guesswork by providing you with up to date market situation analysis, comparative property reports and a objective outlook to how the property will perform in the future.

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OVERSEAS BUYERS ADVICE

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Purchasing real estate in Australia has never been easier. No matter where you live, it is definitely possible to buy a property in Melbourne and surrounds with Vero Property. The buying process differs slightly from your average sale, however, the Vero Property team has invested in providing you with assistance to make the process as smooth as possible.

International investors and temporary residents can buy investment properties in Australia thanks to changes to the Foreign Investment Review Board’s (FIRB) policy relating to investment properties. Investors looking to buy a residential property must be aware, however that in most cases they will need approval from the Foreign Investment Review Board (FIRB).

Residential Properties include all properties and urban land other than commercial properties (for example, offices, factories, warehouses, hotels, restaurants and shops). Farms and rural residential blocks are residential real estate.

Who needs an approval from the FIRB?

Foreign investor

If you are a foreign investor you need approval from the FIRB. The investment property must be a new property or vacant land to build a new property. You cannot buy an established dwelling as an investment property. They can buy a new property in their name and rent it out to their child that is on a temporary visa.

Temporary resident

If you are on a temporary visa such as a spouse visa, 457 work visa or student visa you need approval from the FIRB. You can only buy one established dwelling and it must be to live in, however you will be required to sell it once you do not live their anymore. You can buy an investment property; however it must be a new property or vacant land to build a new property. You do not need FIRB approval if you are buying the property with an Australian citizen as ‘joint tenants.’

You do not need an approval if you are:
  • Australian citizens, residing in Australia or abroad;
  • Holders of Australian permanent resident visas;
  • Persons entitled to hold a special category visa
What type of properties can Overseas Investors buy?
  • Investment properties: In most cases the Australian government will approve applications to buy an investment property on the condition that it is a new property. You can often keep an investment property if you leave Australia.
  • Home (owner occupied): If you are buying a home then you may be able to buy an established property (one that wasn’t recently built). You will have to sell your property when your visa expires and you leave Australia.
  • Vacant land (investment): In most cases the Australian government will approve applications to buy vacant land on the condition that you commence construction of a dwelling on the land within 2 years. You can often keep a property that you build as an investment property if you leave Australia.

This information is provided as a guide only. You should consult the FIRB website at www.firb.gov.au for full details, and seek legal advice before acting on any of the information. If you’d like to find out more about purchasing property in Australia, please contact us.

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