Investor confidence is on the rise and the market is starting to look up, but it pays to think through what you want to achieve before committing.

Building wealth through property is an attractive prospect and many Australians have done just that in recent decades through smart – or just plain lucky – investments. The savviest investors know what they want to achieve with each real estate purchase, weighing up the potential gains with the costs and risks involved, and seeking out properties that directly align with their goals.

It used to be lore that property was a long-term investment of at least 7-10 years for the gains to be fully realised. History shows that such a timeframe will almost certainly come with market fluctuations, but will ultimately result in a profit if you are willing to stick it out.

Cameron Maxwell, LJ Hooker Avnu agent and taxation expert specialising in property investments, says that although real estate has traditionally been viewed as a long-term investment, it needn’t always be the case.

In the last property boom that ended in 2017, for example, Maxwell says many investors were able to buy and sell on the same upcycle, making gains over 12-month periods that were far more achievable than through the stock market. Investors who were also savvy renovators with a knack for finding the worst houses on prime blocks of land in great locations were especially successful at flipping properties for a substantial profit in as little as 6-12 months.

The market has cooled substantially since then, of course, with prices in Sydney alone dropping 14.5 per cent since 2017. Lending restrictions have also curbed borrowings over the past two years. But with promises that lending requirements will be relaxed and analysts predicting market growth will return to positive territory by the end of the year, property is once again becoming an enticing option.

Goal-oriented investing

“Most people assume property is a long-term investment but the kind of property you buy for capital growth with the potential of selling in 12-24 months’ time can be very different from properties that provide a solid rental yield over a long-term timeframe,” Maxwell says.

It all depends on what you are hoping to achieve from the purchase and your goals over the medium to long term.

“Some people invest for the income the property generates, and others for the flip. Some want to make quick money; others are setting themselves up for the future, building their kids’ inheritances, or using their self-managed super fund money to finance their retirement.

Maxwell says the worst thing investors can do is buy a property to flip in an area where the renovation won’t increase its value enough, or buying a property with low rental yield and slow capital growth. Investors also need to be sure to factor in the real costs of owning the property over time and weigh the holding/lending costs and capital gains tax against the potential profits, he says.

Starting is the first step, regardless of what the market’s doing. “Many of the greatest property portfolios started with buying in a market downturn,” Maxwell says. “It really comes down to whether you can service the loan.”

Maxwell advises potential investors to thoroughly research the area they want to invest in, along with defining their goals. If you’re investing for the long-term, also be sure you can emotionally disconnect from the investment during market fluctuations. “Investors that can hold out have a chance at great gains in the long-term game,” he says.

Those hoping to make a short-term gain by renovating and flipping a property may also be able to come out ahead, as long as they take into account the increased risks and choose investments wisely.

The recent Liberal election win put an end to fears negative gearing would be abolished, but Maxwell warns that negative gearing is always going to be up for parliamentary discussion. It may be only a matter of time before a government changes the rules, he says. “My advice is that if you can’t service the property’s repayments, rates, insurances, repairs and a rental income gap without the help of negative gearing, don’t buy it.”

Seeking the advice of an experienced agent is vital if you’re on the hunt for a smart property investment and when you’re ready to rent it out, it’s just as important to seek out a property manager who is invested in your success.

“If you decide to start building wealth through property, making sure you have a property manager you can count on to do right by you and your tenants is a must,” says Nick Georges, LJ Hooker Avnu’s head of property management. “Most property managers are looked at as rent collectors and maintenance facilitators, whereas LJ Hooker Avnu’s property managers are wealth creation experts.”

Finding and retaining reliable and responsible tenants is vital if minimising stress and maximising returns is your goal, Georges says. Keeping on top of your property portfolio is easier than ever thanks to LJ Hooker Avnu’s real-time app and online portal for landlords. “Our technology ensures there is a transparent relationship between landlord and tenant throughout the course of the tenancy – and that’s good news for both parties.”

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