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A Guide To Property Investment - Part 1: How To Start Investing In Property

By Coposit
12/18/2023

Investing in property in Australia successfully can be a tall order, with a lot of planning requirements and rules to know beforehand. Follow our guide to start investing in property the right way.

What is Property Investment?

In a nutshell, property investment refers to the process of buying land or property, and then selling or leasing those assets for profit. This sounds simple but there are many factors to consider, such as; the type of property, your overall goals, the housing market, and how to start the investment property process.

In Australia, investing in property development follows a structured process that is similar across each state.

Here's a simplified overview of the property development process:

  • The property investment mindset
  • Setting your investment goals
  • Choosing the right investment property
  • Analysing the market trends & analysis
  • Financing an investment property
  • Securing the property
  • Managing an investment property
  • Return on investment

The type of property you invest in can also change the process. Investing in off-the-plan property refers to the purchase of a property before it has been built.

Buyers are making a decision based on the plan, designs and prototypes rather than the finished product. This method of purchasing is common in new developments, including apartment complexes or new housing estates.

The Property Investment Mindset

When you begin the journey of property investment in Australia, the first step begins with the correct mindset:

Thinking About Your Goals

An important question to ask is, why are you investing in a property? Many property investors’ goals are increasing wealth, either as passive income or to achieve capital growth.

But there are other forms of investment, so what attracted you to property investment in the first place? Are you planning on living in the property, or using it later down the road? These questions will guide you on the best strategy to use.

Understanding Your Current Financial Situation

What kind of capital do you have? The amount of money you have on hand impacts the type of property you can invest in. Many first-time investors rely on borrowing power, to secure funding from mortgages.

In most cases, you need to be able to cover the 20% of the property's cost for a deposit, plus taxes, and management. With off-the-plan properties, the deposit percentage developers typically accept to secure the property is 10%.

When you borrow money from a lender but do not have the initial funds to cover a deposit, an LMI (Lenders Mortgage Insurance) can help you secure the funds for investment. A lender will take out this insurance to cover the risk of not recovering the outstanding loan balance if you, the borrower.

This makes it more appealing for a lender to approve you for a property investment loan, meaning lenders with an LMI are a smart choice for investors with lower initial capital. It is important to note, however, that an LMI covers the lender, not you, in the instance of not being able to meet their loan repayments.

Remember to always browse a variety of local markets and find the property that fits your budget and realistic borrowing power.

Considering Professional Support

Especially for first-time property investors, real estate investment can be complex, with many legal, financial, and local housing market variables at play.

Professionals such as realtors, mortgage brokers, and buyers agents, offer expert guidance on market trends, investment strategies, and property management.

Seek professional support on your property investment journey.

Why Invest in Property?

As opposed to other forms of investment like stocks, cryptocurrency, or mutual funds - investing in properties in Australia comes with unique benefits:

  • Stability – The property market can often be less volatile than the stock or cryptocurrency markets.
  • Capital growth – When property markets increase in value over time, the investor will increase their capital gains as well.
  • Tax deductions – Many Australian states offer tax incentives for property investors and landlords.

There are also benefits that are unique to investing in the right off-the-plan property for you:

  • Purchase at current market rates - with capital growth, typical investment properties increase in value over time. When purchasing off-the-plan investment properties, you pay the current market rate before it is built, locking in the price for potential capital gains later.
  • Stamp Duty Concessions - In some Australian states and territories, there are stamp duty concessions or rebates available for off-the-plan purchases, for first-time buyers and investors.
  • Brand New Property - Investors get a new property with modern amenities and designs, which means less repair and maintenance costs.

Setting Your Investment Goals

People generally get investment properties to:

  • Create a source of passive income
  • Increase capital gains, short-term and long-term
  • Help with future monetary stability, like retirement, paying off a mortgage, or creating a college fund

By splitting your goals into short-term and long-term, you can focus on what you are willing to compromise on when investing in a property:

Short-Term Goals

  • Emergency Funds - Building a savings buffer for unexpected expenses.
  • Vacation - Saving for a dream holiday or special trip.
  • Saving for a Purchase - Accumulating enough for a deposit on a house or vehicle.
  • Debt Reduction - Allocating funds to pay off high-interest debts.
  • Start-Up Capital - Gathering initial funds for a small business venture.

Long-Term Goals

  • Retirement - Accumulating sufficient funds to maintain one's lifestyle post-retirement.
  • Wealth Building - Growing net worth through assets like stocks, real estate, or businesses.
  • Children's Education - Setting funds aside for children's university or postgraduate studies.
  • Financial Independence - Amassing enough capital to reduce reliance on regular employment or paying back large debts such as student loans.

Investing in a property has many benefits, both long-term and short-term. Getting started in the property market doesn’t have to be difficult.

The upfront costs differ depending on many factors, but with Coposit, you can get started even faster, with just $10k needed upfront. See how to invest in off-the-plan property today.

Contact us to find out more and ask our team about investing in off-the-plan properties across Australia or if you have any questions.

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