Investment property has been a common way to generate wealth since ancient times. And there has been no more common type of property for investment than homes: residential property.
In this article we will have a glimpse at this type of property as a class of property investment and note its characteristics.
Residential property is a great category of property investing to consider, in that all of us have experience with it. We have all lived in a home and many of us have experience in renting as well as owning a home. Many have experience in living in an apartment or detached unit in addition to living in a free standing individual home.
Let’s begin by considering general characteristics of residential property in property investing.
• There is a huge demand. Everyone needs to live somewhere.
• Supply is often limited. Residential supply in Australia is generally measured in “net deficiency.” That’s the number of additional homes needed to properly house a given population.
• Rental yield is typically well below home loan interest rates. This is governed primarily by the growth of property prices, the ability of people to purchase those properties, the availability of rental properties and the number of people needing a place to live. In general it’s going to be a bit more expensive to purchase your own property than it is to rent one like it from someone else. Prices will adjust themselves as necessary to maintain that balance. Where it’s not true there are other dynamics involved swaying it one way or the other.
• Times of vacancy tend to be minimal as compared to commercial property.
• Finance for the purchase is relatively easy to obtain. Lenders are comfortable with it and will offer very attractive LVRs and interest rates.
• Should there be a need to liquidate the property, it can be done quite quickly in most metropolitan areas given that the seller is seeking market value.
• Rental terms tend to be relatively short – 6 months to a year is common. It’s not uncommon for tenants to change often.
Loans for property investment
If you are contemplating an involvement in property investing, give the friendly credit managers at State Custodians Mortgage Company a call. They are very experienced in providing the finances for such an investment and will be very helpful to you. Call today on 13 72 62.