Our observations in the real estate market over the years as the best buyers agency Melbourne have shown us that many people profess to know everything there is to know about investing, while they don’t.
Australian property buyers agents understand that many Australians, often those who have made at least one property purchase somehow feel they have a thorough knowledge of how to generate money via real estate. Everyone thinks they have an opinion on this “BBQ stopper” subject or that.
Investing in the real estate market, however, is a little trickier to grasp in terms of the finer details. To fully understand the advantages and disadvantages of real estate transactions, you need to have been involved in several agreements over a significant time span.
Being a melbourne buyers agent doesn’t even guarantee an error free purchasing property process, except for experienced accredited property investment advisor such as our Melbourne buyer’s agent teams.
Hence, in this articles our Melbourne buyer’s agent experts has explained why is it a good idea to invest in Melbourne property market, the property search process, and what benefits does it provide over other asset classes?
Property Market 101
There are several ways purchasing a real estate can generate returns or accrue benefits to you. With our years of experience at buyers agency Melbourne, we have seen it all regarding property purchase.
We understand the pros and cons of every investment strategy in real estate as one of the best buyers agency Melbourne you can ever come across, this is the reason why 99.99% of the time, our clients are always on the winning side.
So we talked about how best you can maximise your returns in property purchasing in this article. So read and learn. You can also reach out to our experts at buyers agency Melbourne office if you have any specific needs or questions to ask, kindly reach out to us.
The first is profit from renting
To put it simply, this is the money you make by renting out your asset.
Yield, which refers to rental income, is a percentage measure of profitability. Divide your annual rental revenue by the property’s estimated or actual value to get your yield. The yearly rental return is 3.5% if you pay $750,000 for an investment property that brings you $500 in rent per week (or $26,000 annually).
Gain on investments is the second part, and it is the one that has been proven to increase wealth the most.
The increase or decrease in value of an investment over a specific time frame is known as capital gain. Your return on investment (ROI) would be 6.0% if the value of your $750,000 investment increased to $795,000 after a year.
That’s a total yearly return of 9.5% on your money invested in our example property of 3.5% income + 6.0% capital gain.
Incentives to Invest in Property Market
Due to its many advantageous features, real estate market continues to be an excellent investment choice. In most of the cases, it offers a means for capital expansion and stability for property buyers.
Compounding Returns in Investment Property
The compounding of an investment property worth is another magical facet of property business investment, according to elite buyers agents.
Gains for property investors are compounded over time, not just on the initial investment. The value of their home or property rises exponentially as they continue to reap capital gains on top of capital profits year after year.
Assumes your $750,000 property investment grows in value by 6% annually for a decade. This doesn’t imply that you’ll earn $45,000 each year for ten years, or $450,000 overall. Not at all; in fact, it’s much superior.
The home will be valued $795,000 after a year. A 6% increase on $795k in year two would be $842k. In the third year, you may expect an increase of $893,262.
If we project this trend out ten years, your $750,000 investment property will be worth $1,343,135 after a decade; this is a capital gain of $593,135, or an incredible 79% increase in value. Visit Perth buyers agency to learn property facts
Leverage Opportunity in Off-market properties
The capacity to borrow against a property’s worth at a far greater LVR (loan-to-value ratio) than you could against, say, a portfolio of shares makes it an attractive investment even if interest rates rise.
Continuing with the prior scenario, let’s assume you’d be able to secure a loan with a loan-to-value ratio of 95% on the $750,000 property you have been using.
That translates to a loan from the financier in the amount of $712,500 at an interest rate of about 4.0%. With these numbers (assuming an interest-only loan), your annual interest payments will be $28,500.
Here’s the amazing part: you’re making 9.5% annualised on the $712,500 in loans, or a fantastic $67,688. You are still making $31,188 a year, even after paying interest to the bank.
Investment properties are the only investment instrument that permits borrowing at such high LVRs, and savvy home buyers and elite buyer agents know that this is the key to rapidly growing wealth.
Additional Ways for Returns on Investment Property
There are other more immediate ways to increase property investment profits in property transactions. Buyers agents and real estate agents believes that enhancements of a property outlook can raise the worth of the property.
Maybe just a coat of paint and some new carpet will do the trick. Some landlords and real estate agents may even consider constructing more units or enhancing the parking space for their tenants.
As a qualified property investment advisor, we do advise that with a careful planning and no over-capitalization (spending more on an upgrade than it contributes in value), a property’s rent and market worth should rise after a renovation.
Many real estate agent do understand that there is always the possibility of redeveloping a property if you’re the enterprising sort. There might be possibility for a duplex or a small development on the land.
While this may necessitate more financial outlay, it may result in a significant rise in rental revenue and market value. A Melbourne buyer’s agent expert’s advice is essential if you want to see success with this plan.
Conclusion
To know the best timing for the right property in the Melbourne property market, and when to take the best opportunity in property purchase, our buyer’s agent recommends that you follow the right approach for your dream property. Contact the best buyers agency Melbourne for the best results.
At buyers agency Melbourne, we always have the interest of our clients at the centre of our operations. Working with our experts at Buyers Agency Melbourne, you can be rest assured you are getting the best deals.