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Investment property: When to buy? When to sell?

27/06/2019

There is more to selling your investment property than just needing some more money. Similarly, there is more to buying an investment property than just finding a house within your budget.

 

The housing market can be a volatile space at times – often chopping and changing, going up and down and changing from suburb to suburb. All of this can make it pretty confusing to figure out when to buy, sell or hold investment properties.

 

Given the rising housing costs across Australia, they are many considerations that go into making decisions regarding your investment properties. Location, the general housing market, the market for renters, valuations, your budget.

 

Key Tip: Create an investment plan. By identifying and setting with clear goals of what you want to achieve you can start to actively work towards them.

 

When to buy

Honestly, the best time to buy is when you can afford to. Other than that, there a few critical things to consider when buying:

 

  • Location, location, location

Cities will pretty much always be expensive, but if you’re looking for an investment property with longstanding value try looking close to schools, universities and public transport. In these areas, the demand for properties to rent can be high, plus you will pretty much always have someone wanting to live there.

 

Basically, desirable neighbourhoods will have a good return on investment, as you will be making more from rent – just make sure this is in line with your mortgage though!

 

  • Price

Obviously, you should take into account your own budget but, looking into the budget for your potential renters is also beneficial. A quick Google search can help you figure out the average rent for similar properties in the area you are looking at. Knowing this means you can figure out if this property will be a money-making adventure or if it’s a property that will barely break even.

 

Key tip: remember to think like an investor, not as if you are buying the home for yourself. If you aren’t going to live in the house, you can leave out the sentimentality of buying a house, and make logical, informed decisions rather than emotional ones. 

 

When to sell

People sell when they sense fear - we saw it during the global financial crisis. But, fear not, just because the value of an investment property is dropping now, doesn’t mean it can’t make a comeback. Many things can influence the changing prices of houses – the age of the population, nearby developments – but if the renting market is still strong, there is little reason to sell during this time.

 

However, if you have purchased in a town with limited industry – i.e. a mining town – that has recently taken a downward turn, it may be a long while before the local economy steadies and your property value rises again.

 

The biggest time to sell is when the renting market is dropping. As the market for rent drops, your house becomes less profitable for you.

 

This is not to say that this is a bad investment or one that you should get rid of. This is the time to get your property valuated by a professional to figure out if you will make a profit by selling – which given the rising in housing prices across Australia, you most likely will have.

 

Key tip: If your property is no longer serving your investment goals, it can be worthwhile to sell your property and re-invest in one that will further your portfolio.