People like to invest in property because it is tangible and has many tax benefits. Contrary to popular belief, you don't need a lot of money to invest in property. What you do need is a regular income and a good credit rating.
Lending institutions want to lend money for property. They will bend over backward to lend money for the purchase of investment property. Their loans are backed by the knowledge that their money is relatively safe and it is earning them more money with little or no risk.
Property loans can be as much as 110% from some lenders. The extra money borrowed means more profits for the lenders. The fees involved with loan establishment mean that the financiers can lend even more in the loan. When you apply for a invent property loan, be aware that you are being assessed on your credit worthiness. This is really the only major concern of the lender. Even then they are safe in the knowledge that they have property as the means to getting their money back if they need to.
Income vs. Capitol gain
So what's in it for the investor? The old adage of using other people's money to invest comes true when looking at property purchases. Not many people can afford to buy property with cash.
The investor should look closely at returns and cost during the life of the investment. This will be the income producing proportion of the investment. Ongoing costs should be investigated in there entirety before purchase. Allowances for increases in these costs as well as new costs should be calculated into a yearly budget or forecasted projection of returns.
The investor can make returns on capitol growth but be aware that this can be minimal if the property is purchased at a price above the market. When you buy your investment property, the purchase price is far more important than the future selling price. The future selling price can only be speculated upon whereas the initial purchase price is known at the time of purchase. Most gains can be realised at purchase.
Consider the Land Price.
An important consideration when trying to establish the value of a prospective property purchase is the land price. Dwellings on land, be they buildings of brick or timber will always depreciate in value over time. The government gives generous depreciation allowance in tax concessions for depreciating investment dwellings. However the land value upon which the dwelling is situation will increase in value. It is the increase in land value that will give you the capitol appreciation of the investment. For this reason it is often thought that units or multiple dwellings on one block of land do not perform well in terms of capitol appreciation. They can however have substantial benefits in income returns.
For more information on property investing , visit http://www.propertyinvesting.freedvd.com.au
James McInnes is a professional share market trader and investment entrepreneur, with many years experience trading the Australian Share market. You can visit his site at http://www.propertyinvesting.freedvd.com.au for further information on trading the Australian Share Market