Can't afford your first home? Buy your first investment instead


Houses anywhere in Sydney are either very close to out of reach or completely out of reach for anyone trying to save a deposit for a mortgage. Had you owned an investment property in Sydney prior to the boom it is very possible you could have used the growth in the value of the property to buy your own house. Entering the property market in a different capital city and using the growth in your investment property might be the ticket to your first home. Here are some tips on what to look for and consider when buying.


The Property Clock

Research indicates that the property market operates in a repeating cycle. The cycle is thought to last 10 years and includes four different stages. The top of the clock is thought to be when prices are at the peak of the market cycle. This is simply called the top. Following the peak of the prices there is the plateau or slight drop in prices, this is called the slide. At the bottom of the market cycle house prices are thought to be at their lowest. This is called the bottom. Moving clockwise from the bottom of the property clock, the next part can be split in to two parts. The first is as the market starts to rise a little bit. Between the metaphorical 6 & 9 the rise occurs. Between 9 & 12 the market is considered hot. This is when price growth historically is strongest. After the price growth the market hits the top of the clock and the process repeats itself again for the next 10 years.


Infrastructure

This one is definitely worth looking into. The general feeling is that infrastructure spending boosts jobs in the local area and drives people into the area due to its proximity to jobs or even the new infrastructure should it be new transport such as rail or an airport, a hospital and roads as they make areas much more accessible. Not all infrastructure projects are equal though and it is important to consider each project for its merits. While a road boosts employment to the area during construction after the construction period the jobs are finished as opposed to an airport where there are jobs during construction but there also ongoing jobs associated with running and maintaining an airport.


Scarcity of Land

The one thing that can never be changed in the equation that is housing prices is the amount of land available. When you drive around looking at houses you want to find a suburb that can't have a lot of houses added to. You want your property to be where there is only a small amount of land available for development, even better if there's none, because when this is combined with high demand it will drive the values of the existing houses up. This is simple supply and demand. If there's 500 houses in a suburb and there's demand for 1000 houses, those 500 houses will climb in price. It is also important to identify that an area will experience population growth as well because if no one wants to move in prices aren't going to rise.


Negative Gearing

Negative gearing has been blamed for a lot of the price growth which very well could be true. Until that argument can be proven beyond doubt though, as the saying goes, "if you can't beat 'em, join 'em." Besides the opportunity to have your asset grow in value negative gearing can really help boost your savings. The way it works is the ATO assesses whatever rent you earn and adds it to your annual income and then from the sum of your income and the amount of rent you have earnt for the year you deduct your expenses of making that rent. Things like interest charged to the mortgage, landlord insurance, utilities, property management and depreciation are all deducted from your total earnings and this adjust your taxable earnings accordingly. If you are looking at investing because you want to lower your tax liability an appointment with a qualified accountant is almost a must to make sure that you are not making any mistakes.


These are only a few ways to ensure you have found a suitable investment property and making sure you are making your the most of your money. Doing your own research is of utmost importance but if you're time poor or unsure about doing the research yourself, having a buyers agent on side is a really easy way to ensure you are making good decisions as is having a professional Mortgage Broker to ensure that your finance structure will support you into the future.