Buying an investment property

Recent world events have led people to examine their investments, and in many cases, look at redirecting their funds away from stocks and shares and into real estate. In Adelaide, for instance, the average proportion of the population looking to invest in property normally hovers around eight percent; since September 11, it has reached a figure closer to twenty percent.

A`significant number of these people will be looking at real estate as a moneymaking venture for the first time. If you fall into this category, it is important to realise the difference between speculation and a real estate investment - very similar, actually, to the difference between buying high-risk shares for short-term gain and investing in blue-chip stocks as part of your superannuation portfolio. Speculation involves the purchase of a house or unit, paying the relevant stamp duty, fixing or decorating a bit here and there, and then, before you can say 'landscaped garden', placing it on the market again for a much higher price. Investing in real estate, on the other hand, involves a secure and, most importantly, long-term relationship with a piece of property.

In the press lately there have been many seminars and workshops advertised by advisers about how to make the most of the current real estate prices and low interest rates. But anyone really interested in placing their hard-earned cash into real estate should first question the qualifications and objectivity of those handing out such advice. For instance, one of the key tools some advisers are putting to clients at the moment is the use of computer software that will project the capital gain to be obtained on an investment property, for instance over a ten year period. Or a representative of a local or Gold Coast development company will explain how an investment in his or her organisation will provide a 'guaranteed return' or 'guaranteed rental for X years'. What they don't explain is that in most cases, the 'guarantee' has been factored into the purchase price - so that while you may receive your 'guaranteed' $260 rent for the stipulated two years, once the contract lapses you are rudely awakened to the realities of the existing rental market, which may provide you with something closer to $210 a week.

As an investor in real estate it is crucial that you receive independent advice. Find a best-practice real estate agent without financial ties to any development, who will find for you the type of property in which you wish to invest - one that will provide a solid return on your money without constant maintenance costs. Then find an independent accountant and an equally independent solicitor to ensure your money and contracts are handled appropriately. At the end of the day, then, you should gain a property that serves your financial needs and forms the basis of a long and rewarding investment.

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21 Jun 2019