Guide to investing in real estate

Investing in real estate can bring in big profits, but financial losses are not uncommon either.

Every investor, whether an expert or a beginner, needs to consider the degree of risk in an investment at every step of the way. Only once you’ve addressed all the potential hazards and have a contingency plan in place should you consider making your investment decision.

It’s important to think ahead to plan the best time for your investment and create a strategy - any investment professional will tell you that a strategic investment is the best investment.

As an investor, ultimately you are the decision maker, but if you’re starting out then you will need a professional team with the right qualifications, skills and experience to help design and build your strategy.

How to start investing in real estate

The team you need to start your real estate investment journey

Property investment advisor

A property investment advisor can help you build your investment plan, starting by establishing your personal goals and then setting what financial goals you’re aspiring to. They should be able to explain all the risks every step of the way and provide guidance around capital growth and rental income projections.

Mortgage broker

A mortgage broker is responsible for finding a suitable home loan for your investment property, which is much more difficult than finding a home loan for an ordinary home. They will be able to tell you the structural separation of a deductible and non-deductible loan and can work with your property investment advisor to check that you have the financial capacity to afford the investment property.

You can also leave it up to yourself to compare investment home loans. We compare a range of Line of Credit, interest-only and professional package home loans so you can make sure you're getting the best deal.

Contact a mortgage broker about your home loan enquiry

Accountant

An accountant should be able to spell out anything related to your investment property and tax. They can advise on whether the property should be purchased in your personal name or as an entity, company or trust. They can also advise on lending structures and the tax implications associated with your investment.

Buyer’s agent

They should refer to your proposed strategy and understand what your criteria is in trying to find an actual property. They may secure or help you identify a property that will best deliver the capital growth or cash flow, depending on your needs.

What to look for before investing in real estate

Tod Peterson

As a case study, Tod Peterson, Director of Peterson’s Property Search points out some of the factors that you should consider before investing in real estate.

‘Surprisingly, the Darwin property market still falls under the radar,’ Tod says. ‘Nationally, not a lot of people know what is happening up here. And as far as the international community is aware, it’s all about crocodiles, Aboriginals and cyclones.’

But despite the stereotype, there has been interest, with Australians and expats wanting in the market that Darwin has to offer.

‘It comes down to demand, supply and sustained growth,’ he says. ‘Accommodation has always been limited and the consequences of that have led us to amazing rental returns, like up to 6.2% in the highest capital city in the nation and sustained capital growth, with about 6% so far with entry-level houses in the Northern suburbs.’

Factors to consider before investing in property

  • Supply and demand
  • The property's value
  • The local economy
  • National economic activity
  • Human interests and emotional behaviour of potential tenants

Learn more about buyer's agents

Testing the insider knowledge from a buyer's agent

Some indicators that can forecast the market of your investment property include transaction activity and economic growth as well as infrastructure and population growth. According to Tod, the little details are the best, ‘We have a growing population whose median age is 28 years supported by big infrastructure and many big projects ranging from Myer’s involvement in the Northern suburbs to the creation of the Index LNG processing plant. These are creating jobs with good pay packets,’ he says.

‘There are a number of large projects due to come online so I can see a self perpetuating situation. Interesting to note, Darwin has a high population of tenants - about 54% compared to that of other capitals.’

But remember that the strategic investor is not easily swayed by the promise of returns and will consider external factors that could affect their outcome.

‘Be careful,’ says Tod. ‘Just because someone is achieving an 8% return doesn't mean you will do the same at your borrowing price point. Don't get confused with a lot of media hype.’

‘Do your own research or gain information from impartial sources. There are some good reports that are available and websites to access. If you are wanting to invest, check your borrowing power.’

Investor profile: how a buyer's agent can help you.

Andrew Branson

  • Active property investor
  • Used a buyer’s agent to help him find the right property in Darwin

How many investment properties do you currently own?

I own six properties at present.

Did having a buyer’s agent help you in your property investing journey? How?

Yes, it definitely helped. I have only used a buyers agent once and the result was great. I was looking to invest in Darwin, which is never easy when based in Melbourne. I came across Tod Peterson on the internet and after a couple of initial phone calls came to the conclusion that he had the necessary local knowledge to assist me. He suggested several options and in the end we narrowed it down to two brand new apartments. I then chose to fly up to take a look at them both and chose my favourite which was a two bedroom, two bathroom unit in Nightcliff. The building work has been recently completed and a tenant is in place paying $900 per week fully furnished. The costs of the unit was $495,000 plus $20,000 on furniture. That works out to be in excess of 9% gross yield so we’re very happy with the outcome. Overall, Tod’s help and advice was crucial to making this the successful investment that it is proving to be.

I have only used a buyer’s agent once and the result was great.

Any tips for those looking to start investing in real estate?

Just take the plunge!

Compare loans for property investment here

Rates last updated October 23rd, 2018
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.89%
4.24%
$0
$0 p.a.
80%
Fix your rate and minimise repayments for 2 years with this interest-only investor mortgage.
3.99%
3.99%
$0
$0 p.a.
80%
Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required.
3.99%
4.13%
$0
$10 monthly ($120 p.a.)
80%
A competitive variable rate home loan with no application fee.
3.84%
3.91%
$0
$0 p.a.
80%
Get instant online approval and flexible repayment options with this fixed rate mortgage for investing.
4.08%
4.09%
$0
$0 p.a.
90%
Low-fee investor mortgage with a partial offset account. 10% deposit option available.
3.79%
3.82%
$0
$0 p.a.
80%
An essentials variable investor mortgage with a high borrowing amount so you can fund a large purchase.
3.93%
3.94%
$0
$0 p.a.
80%
This investment loan keeps fees low, has a sharp interest rate and comes with a 100% offset account.
3.99%
5.35%
$600
$0 p.a.
90%
Competitive rates for fixed for 3 years with redraw facility.
4.05%
4.22%
$0
$10 monthly ($120 p.a.)
90%
Lock in your interest rate on your investment property for 2 years. For a limited time you can earn double Velocity Frequent Flyer Points.
3.91%
3.92%
$0
$0 p.a.
80%
Investors can go from application to approval in as little as 20 minutes with this innovative online lender.
3.98%
3.98%
$0
$0 p.a.
70%
Investors can get a 100% offset account and a low rate if they have a big deposit. 100% online application process.
4.09%
4.87%
$0
$395 p.a.
90%
Buy your investment property and set your repayments for the first year. Available in QLD, NSW and ACT only.
4.24%
4.00%
$0
$0 p.a.
80%
Buy an investment property and enjoy the certainty of a 3-year fixed rate with interest-only payments.
4.09%
4.40%
$0
$0 p.a.
70%
Forget about rate rises for two years and minimise your investment repayments with this interest only mortgage. Requires a 30% deposit.
4.54%
4.56%
$0
$0 p.a.
80%
An investment loan for new Heritage Bank customers. Low fees and interest-only repayments.
3.97%
3.99%
$0
$0 p.a.
80%
Package your owner occupied loan with investment loan and receive a discounted investment rate. 100% offset account included.
4.09%
5.28%
$0
$395 p.a.
90%
Lock in a competitive investment rate and combine your loan with a credit card and transaction account for extra savings. Package fee applies.
3.99%
4.62%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
4.29%
4.31%
$0
$0 p.a.
80%
Investors will pay no application or ongoing fees for this interest-only loan.
4.18%
4.18%
$0
$0 p.a.
80%
Investors get a 100% offset account and pay no application or ongoing fees on this loan from an innovative online lender.
4.90%
4.31%
$0
$0 p.a.
80%
Lock in a fixed rate for 5 years and make interest-only payments with this investment loan.
4.43%
4.24%
$0
$0 p.a.
90%
Interest-only loan for investment. Available with a 10% deposit and includes a partial offset account.
3.99%
3.99%
$0
$0 p.a.
70%
Investors with a 30% deposit can get this low rate loan to fund their property portfolio.
4.29%
4.31%
$0
$0 p.a.
80%
A simple, variable rate investor loan from an online lender that keeps fees to a minimum.
3.99%
4.62%
$395
$0 p.a.
80%
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
4.24%
4.68%
$0
$0 p.a.
90%
Fix your investment repayments for 1 year. You can get this loan with a 10% deposit. Available in QLD, NSW and ACT only.
4.13%
4.14%
$0
$0 p.a.
90%
Access a fee-free offset account and a special interest rate for investors.
4.14%
3.96%
$0
$0 p.a.
80%
Investors can go from application to full approval in as little as 20 minutes with this innovative online lender.
4.18%
4.19%
$0
$0 p.a.
80%
Investors can easily access their equity using BPAY, a debit Master Card or cheque book with this interest-only line of credit.
4.31%
3.95%
$0
$0 p.a.
80%
A variable interest-only loan for investors. Fast application, low fees, optional offset account. 100% online lender.
4.79%
5.44%
$0
$395 p.a.
90%
Pay off your investment knowing your exact repayments for the first 4 years. Get this loan with a 10% deposit.
4.29%
4.27%
$0
$198 p.a.
70%
Fund your property portfolio with this fixed rate mortgage which includes a 100% offset account. 30% deposit required.
3.94%
3.92%
$0
$0 p.a.
80%
Lock in your interest rate for 2 years and enjoy flexibility, an optional offset account and a fast online application process.

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Marc Terrano is a Lead Publisher at finder. He's been writing and publishing personal finance content for over five years and loves to help Australians get a better deal.

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