No doubt you’ve heard success stories of property investment. So, it makes sense you’re curious about how it can work for you (but still a little cautious). 

There are multiple benefits to investing in residential real estate. Property investment can provide additional income for years and give you financial independence, even before retirement. 

First-time property investors like you might be nervous about starting a residential real estate investment venture, but with a bit of help and guidance, you don’t have to be. 

Why you should consider residential real estate investment

Investing in real estate isn’t a new trend and has been a reliable wealth option even in times of crisis. Unlike stocks, you’re putting your money to work now in tangible ways so you build more money in the future. There’s less risk and volatility than the stock market, so you can count on a steady earnings increase as tenants help pay off your mortgage quicker and the value of your property goes up.  

And when you’ve made your investment the tax deductions are promising. Expenses you can take off of your earnings are mortgage interest, depreciation and goods and services tax (GST).

5 things you need to know before investing

Before taking the plunge and investing in a dud, you have to consider the following factors first.  

The truth is, you’re taking on risk for the sake of consistent returns over a longer period of time so it pays to be diligent about what you’re putting your money into.

1. The differences between residential and commercial real estate

You need to understand what kind of property investor you are. There are some key differences between investing in residential or commercial property and knowing what suits you is vital to your investment success. 

On one hand, commercial real estate refers to properties businesses use for income generation like: 

• Office buildings and spaces
• Retail properties like shopping centres
• Industrial properties like warehouses and storage facilities
• Hotels and holiday resorts
• Recreational facilities like cinemas, entertainment parks and zoos 

However, residential real estate refers to houses and apartments.  

Both are good options but come with differences. Commercial real estate is often larger in size when compared to residential property and often costs deposits and renovation fees. 

You need to assess your finances to ensure you’re capable of paying for the overall cost of your investment. If you’re lacking funds, it might be worth considering having a partner investor onboard to help shoulder the payments or apply for a loan from the bank or other third-party investors. 

These spaces also have varying levels of stability and volatility. Residential real estate tends to be more stable despite economic downturns because commercial properties are directly affected by how the market moves and how consumers are spending.

1. The personality of each location

When you’ve sorted out what type of property you’re investing in, you have to scout for properties in areas suited to your goals. 

You can’t just invest on a whim–you need to figure out what the neighbourhood is like and if it’s a place other people (i.e. renters) will want to live. 

A grungy area with cool bars and cafes will suit university students or young creatives, while corporate workers will probably prefer something closer to a business location.

1. Loans that can help pay off your mortgage

You need to look into your loan options–and there are many–to see what works best for you. 

Banks and non-banks provide plans designed for first home buyers, investors, self-employed individuals or people looking to upsize, downsize or rebuild their finances.

First homeowner grants can help offset the prices of expensive properties. The value of the transaction could affect your eligibility for the grant but applying for it can lessen the cost.

The price at face value can go lower with a loan, a grant or a combination of the two with your budget set aside for the investment.

1. Factors that affect property value

The listing price of a property is made of multiple factors that make up its value. 

For one, proximity to shopping precincts, schools, parks and public transport is desirable but can make properties more expensive. 

Things like property size, condition and age also affect how much renters are willing to pay. A recently-built or renovated home shows renters that critical aspects of the house like plumbing, electrical, roof and insulation are newer and less likely to break down. 

Recent property sales in the area also determine the value of your investment because this sets the “going rate” for similar assets.

1. Hiring a real estate agent is a must

There’s a lot of technical information that goes into property investment, so it’s crucial to hire a real estate agent to work with you and guide you through the process. In the end, they take the guesswork out of getting the best value for your money.

A good real estate agent is passionate and can help you find the best property that will fit your needs and wants so you can enjoy the process of looking for your entry into the residential real estate market.

Residential real estate investment offers multiple benefits and is a great way to secure your financial future. 

So, if you’re ready to start investing in property and want support and guidance from an experienced team, get in touch as we’re ready to help you.