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Owning a rental property can be an excellent revenue generator if you’re financially ready.
Choosing the right time to buy is key, and right now may be it.
Getting onto the property ladder is largely seen as a good investment.
You own something tangible that you can make money from—especially if it’s an investment for renting out.
The tricky part is working out when to get your foot on that rung.
While some investors will all tell you it’s about timing the purchase that’s not anywhere near as important as buying the right property in the right location.
But right now may actually be the best time in a long time as things are lining up to create a perfect storm for our property markets in 2021.
1. There’s Never A Correct Time
The question of timing is one that you have to answer for yourself.
You know what your personal situation is and how it compares to the situation around you.
Your finances and lifestyle will have a major impact on whether or not it’s the right time to buy an investment property.
The local and global economies are the other massive factors in your decision.
That’s why there is never a ‘correct’ time to take the leap.
However, in terms of external factors, now is one of the better times to take the plunge — if your personal circumstances allow for it.
And only you can answer that second part.
2. Interest Rates Are At A Record Low
One of the biggest factors that make the last quarter of 2020 so appealing to property buyers is the low interest rate.
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As part of the efforts to reboot the economy, the Australian interest rate has dropped significantly.
Buyers in the current market can see exciting numbers of close to two percent on a fixed and variable rate at the moment.
This makes mortgages incredibly affordable and is unlikely to keep you snowed in under mountains of debt.
It’s an ideal situation for an investment property that you want to generate a rental income from.
It’s likely that interest rates will remain low for the next few years as the country’s economy comes back to life.
The government will want to keep it this way to encourage the population to buy more and borrow more, as this stimulates growth in the country’s economy.
3. House Prices Are Languishing
When interest rates drop, generally, the price of houses tends to go up.
However, in the wake of COVID-19 and a decidedly stagnant economy, house price growth has languished since the pandemic hit Australia and lockdowns were implemented to stop the spread of the virus.
Now confidence is returning and the property markets are on the move again.
Anyone with a steady job and the ability to service the loan will benefit from the current window of opportunity before the property markets rebound.
4. Demand May Outweigh Supply
In a struggling economy, people who don’t have to, won’t put their houses up for sale.
It doesn’t make financial sense to put your property on the market unless you need to free up some capital.
This means that there won’t be a vast supply of properties available for buyers who want to take advantage of the current situation.
Many of these discretionary sellers are choosing to hold off until somebody rings the bell and tells them the property market has bottomed and is on the way up again due to our economy improving.
This means as a buyer, you’ll be circling a much smaller selection of properties that could be snapped up quickly.
However, this doesn’t mean that you should make a snap decision and rush into making an offer.
This is, after all, a big investment and you don’t want to make an expensive mistake.
5. We’re In A Period Of Recovery
The most important factor to remember about the current market and COVID-19 situation is that it’s temporary.
The economy and property market started off strongly and then slowed through the lockdown.
However, the country is entering a period of recovery.
Additionally, as more people look to take advantage of the current economic situation, they’ll stimulate growth. This growth will lead to prices going up and the market will start to normalise again.
So as you can see, it much more than about timing
When buying an investment property there are far more factors to consider over and above the timing.
You need to look at the location – the 80% of the performance of your property will be related to each location.
In fact the importance of neighbourhood has been accentuated during the lockdown and people will pay a premium in home prices in rentals to live in a desirable neighbourhood that offers a wide range of amenities in easy reach.
Then you need to own an investment grade property in the right location.
Of course savvy property investors will also protect themselves with landlord insurance.
If you’re looking for the right time to invest in a rental property, we can’t give you a definitive answer. We can, however, say that statistically now is a good time. If you can capitalise on lower prices and interest rates, your investment will pay off in the long term.