>Property still better than shares & 5 tips to consider when investing in property

Following last year’s strong performance of the property market and the continuing volatility of the share market, many investors are choosing to stay or return to property investing despite the recent interest rate hike, suggests Robert Projeski, managing director of Australian Mortgage Options.

Housing approvals nationally are sitting 18% below the 2003 high and 3.4% below the long term average and investor finance at just $4.8bn for March 2008 making it a drop of 4.6% taking it to 18% below the 5 year average (2003 – 2008). [Westpac May residential report]

Despite the slowdown in demand, house prices are set to continue to increase in our capital cities with exceptions made only by Sydney, Perth, Hobart and Darwin. The decline largely due to mortgage stress and the affordability crisis brought about by increasing finance costs and the US sub-prime market impact.

“With Perth recording a drop of 0.5% on median house prices (average) and a stable level of housing approvals, suggesting further price growth and continuing rental demand, thus making it one of the locations to make your investing count in” suggests Mr Projeski.

With Sydney’s vacancy rates at just 1.6% it further suggests that the ‘Western City’ is a good place to put your money. However, when looking at investing in property it is essential to do your research and homework. Look at statistics, sales history, employment trends and other factors affecting the location you wish to invest in, before you make an offer of purchase.

As timing and the right price are the essential factors in buying well performing investment properties, it is paramount to not simply listen to friends, family or agents, but to do your own research, either through a professional or on your own, stresses Robert.

“We live in a time where one can easily access sales history, statistics and performance reports to decide on the best investment location and with finance options being more flexible than ever – purchasing worthwhile investment property has never been easier”, he added.

5 tips to consider when investing in property, which are worth considering if you looking to play the high rental yields current available in the Australian metro marketplaces.

1) Using property experts. Just because you have bought and sold a couple of houses with profit, does not mean you are an investment expert. Don’t listen to friends and family blindly – usually they have an opinion about investing, often despite that fact they are not doing it themselves. Property investing is too important an expenditure to take chances with – talk to property experts, investment advisors, finance brokers and study property reports before you make a decision.

2) Waiting for the price to come down. Property generally always goes up in value. It may plateau or slip back a few %, but across the board – prices are steadily claiming. So, if you wait until the prices from 10 years ago return, you will wait a long time. You are in most cases better off buying now rather then in 6 months, as often you will pay more down the track – effectively reducing your capital growth. Having said this, the best time to invest is when you are ready to do so. Sooner than later is usually best.

3) Emotional vs commercial decision.When selecting and deciding on an investment property – do yourself the favour of approaching this simply as a commercial decision based on figures, returns, vacancy rates etc, not what colour the walls are, whether you would want to live in it or that it is in easy reach so you can mow the lawns on a weekend. The more emotionally detached you are, the better it is. Investing is done from the head, a home is bought from the heart.

4) Old vs New.Unless you are a tradesman or have loads of time to spare to perform renovations, repairs and maintenance, you probably are better off buying a newer investment property. Apart from the work and expense, your depreciation schedule is more substantial on a new property than an older one. After all, it is all about letting your money do the work – work smarter – not harder.

5) Managing the Property Yourself. Unless you are rather experienced in this area and have access to the industry tools to ensure you do end up with the best tenants possible – don’t do it yourself. Firstly, if you do select a ‘lemon’ for a tenant, this can easily turn into a lengthy process in front of the tenancy tribunal, with loss of rent, loss of access to the property, presentation costs etc. Once again, you want to work smarter not harder. So, get a good property manager to look after your investment. The percentage you pay them should outweigh any losses through your own tenant mismanagement and peace of mind is worth a lot!

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