6 Popular Investment Strategies For First Home Buyers In Australia

Property investment is becoming considerably popular among Australians, especially the youth. Youngsters have been known to be very keen on investing in assets that would fetch profitable returns and yield quick growth. 

Real estate investment opportunities have always been a robust option as they are a combination of stability and high return on investments. That said, properties are tangible assets but the risk-reward ratio is dependent on several factors. 

Thus, the overall trade-off is relatively lower than assets like stocks. The type of investment strategy you are going to use is going to decide your returns. Let’s understand a few investment strategies as a first home buyer.

1. Buying And Holding An Established Property

This is one of the most popular strategies in Australia. You have to be patient when you are using such a strategy as growth is steady. A house or an apartment in an area with high capital growth will provide better returns. 

When you are buying a property to rent out, you have to think long term. The value of the house will appreciate due to the development in the local area. Hence, it has less risk and will give you tax benefits.

2. Positive Gearing/Positive Rental Cash Flow

The main purpose of this strategy is to generate a relatively decent passive income. Such a property has the value of rental income coming in greater than the expenses involved in maintaining it and taxes involved. 

In this strategy, you need to buy a single property of any kind in a high-rent demand area with lucrative property investment opportunities to get additional income. 

Positive Gearing is known to provide additional money. There are multiple ways to use this additional income. For example, you can use it for making future investments in the house and improving the lifestyle factor.

3. Buying New Properties In Rising Markets

In this strategy, investors are known to buy property directly from the developer or an agent when the development is ongoing or recently completed. As you can tell, this has obvious benefits and at the same time, glaring risks. 

If you are buying a house for the first time, you need to be very careful while buying off-the-plan properties to make it an awesome investment with value growth. 

A well-researched plan establishes the growth of your property by the time you hold possession. The main benefit of buying a home in rising markets is that you will also know the plan of your home beforehand and can suggest changes and customize it according to your needs. 

4. Renovation And Holding

After you buy a property for the first time, you can opt to renovate it. This has future benefits as it is known to increase the rental inflow and increase capital value. Why? Simple! People love to live in fresh and newly renovated homes.

Thus, renovating would increase equity and ensure positive cash flow. However, you must first create a clear budget and identify hidden costs and the possible increases in expenditure. Every first-time home buyer expects their investment to be successful and fetch positive returns. 

Renovating the property may look very favourable in such cases to ensure returns on the investment you made. However, the renovation can be a hassle in the long run and be time-consuming. 

5. Property Flipping

Many first-time home buyers in Australia decide to buy a run-down or dilapidated property and transform it to fit the recent trends and make it brand new. 

Such a transformation is known to increase the demand for the property in the market and hence increase its value. They sell it at a higher cost to make considerable profits. 

The renovation needs to be done quickly to ensure minimum payment of taxes due to buying the property. Property flipping can be very beneficial but the devil lies in the details. 

It can be risky, in fact, considerably riskier than most types of real estate investments. That’s why caution must be exercised before entering such a volatile field.

6. Buying Houses Vs Apartments

For years, first-time homebuyers in Australia have been haunted by the question of houses vs units. Houses tend to be better investments in regional areas as they provide better capital growth. 

However, it depends on demographics, the demands, and the future supply of a particular locality. In certain suburbs, units have outgrown houses in return. In matters of yield, apartments have higher rental returns than houses. 

A house requires more maintenance and the holding costs build up as compared to a unit. Therefore an apartment attracts younger people and first-time homebuyers to purchase or move into them. 

Apartments often come with a smaller land content than houses. A house has backyards and lawns, which adds up to the land ownership. A house looks good for a family. 

But as an investment option, apartments are known to be better. When you purchase an apartment, you can also enjoy the tax benefits when the apartments are built in a meagre fashion. 

The location of the house or apartment should have a huge effect on your decision to buy one or another, and you should always follow research-based property investment.

Conclusion

Overall, real estate investment opportunities have been observed to rise, especially after the impact of Covid-19. The property markets are experiencing an upswing in prices. It is a very beneficial time to invest in property. 

As a first-time buyer, you need to gauge all your investment options and focus on what’s unique. It’s really about understanding the local economy and fulfilling the chain of supply and demand. If you need help, feel free to contact us and you can always rely on experts like Quarter Acre.