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Is now a good time to buy an investment property?

With all the uncertainty in the world at the moment, many people are thinking to themselves, ‘is now a good time to buy an investment property?’

‘Even in the current market, plenty of us are looking at getting our foot in the property door. It is easy to understand why.’

Purchasing property to rent out is still the most popular way to build up assets. However, it is a major decision, which requires planning, research and careful budgeting.

The good news is that property can be a potent wealth builder over the long term, and like any investment it experiences cycles. So is now a good time to buy in? It depends on your goals.

Here’s 5 steps you can apply to property investing that will pay off.

1. Time Frame

Knowing when to jump in really depends on your investment time frame. Property is an investment with at least a 7 to 12 year horizon, depending upon market cycles. Transaction costs to buy and sell are around 9 per cent, which means you have to make that back before you get the benefit of any growth. Property investment as a short-term investment is only for the very lucky, or the very brave!

2. Strategy

The right time to invest in property is as soon as you’re financially ready, and that means putting together a strategy that includes a purchase plan and budget, because you really need to know how much cash you have available to invest and what returns to expect. And you’ll want to look at the tax benefits too. For example, with a positively geared property the tenant repays your loan while you build equity. This allows you to sell the property later and use the proceeds as a deposit for your next property.

If you are wondering is now a good time to buy an investment property, then start preparing now so you are ready to buy when the time is right for you

3. Pre-approval

Be ready to buy the perfect property when you find it by getting a pre-approval. A good mortgage broker can be a valuable resource in this step.

Did you know that after you take out a loan to purchase an investment property, interest on the loan and most property expenses can be offset against rental income for tax purposes?

4. Research

Based on your strategy (negatively or positively geared), you’ll be able to begin your search, which will ultimately determine whether there is a good investment out there that fits your budget. Look for areas where high growth is expected, that is, where there is potential for capital gains. And check out areas where rental income is high compared to the property value.

5. Take Action – is now a good time to buy an investment property

Making property investment work is about getting the fundamentals right, which is usually achieved by solid research, observation and calculated risk. Of course, property prices go up and down, but if you don’t sell you are unlikely to ever make a loss. So don’t let indecision be your biggest barrier to entering the market. With the right advice, research and property selection, you can always profit.

What next?

The best thing to do next is remain in the market — especially if you’re looking to use property as a way to replace your income in the long term and retire on your investments. High yields and pockets of growth can always be found. The key to having a great property investment is ensuring it outperforms the market in capital growth because serious returns come from areas with great growth prospects.

Yahoo Finance published an interesting article about buying property now too.

If you’d like to chat about finance, please contact us.