FAQ - Investment Properties
Does this sound familiar? You want to buy an investment property in an area where property values are likely to rise by more than the average rate of growth, such as the near city suburbs. However values in most of these suburbs are well above average property prices, which means stretching your finances by more than you planned in order to afford to buy in these areas.
Of course this is an over-simplification. There are still opportunities to buy affordable investment properties, of varying age and condition, in areas with good prospects for capital growth. However you should not also overlook the option of buying an investment property in areas achieving closer to average growth rates in property values. Often these areas are further from the city centre.
Investment patterns are changing. Low interest rates enable you to borrow funds to buy investments that achieve yields, or rents, almost equal to the cost of servicing the loan. In the context of property investment this means that you can purchase a recently constructed home in a middle-ranking suburb where the rent virtually matches the loan repayments. In more expensive suburbs a similar property would be more difficult to acquire.
Although the expected immediate increases in property values may be less than other areas, you are nevertheless well on the road towards owning the property without committing substantial amounts of your own spare money. In other words the investment pays itself off.
The other bonus from buying a near new home is the prospect of less maintenance costs. Also if you select wisely, the suburb may eventually become a higher capital growth area as the metropolitan area expands further.
Other important consideration you need to keep in mind if you choose this strategy is to ensure that you select a property and a location, which are attractive to tenants.