How do I know where to invest?

The macro factors that allow an area to go up in value are all based around people, supply and demand. In short, if there are more people demanding housing in an area than what may be readily available, their demand will drive prices higher.

What are the ingredients to a healthy market ?

When the supply and demand equation is mixed with these ingredients to a healthy market, massive price growth can be expected. When there is increased Government and Corporate sector spending on large-scale infrastructure, like:

• Education (Universities, schooling, child care)
• Transport (Extensive road networks, brand new train lines)
• Retail / Shopping (New department stores, town centres)
• Medical (New specialist medical centres, Hospitals)
• More and higher paying jobs will be created. These higher paying jobs will equal increased borrowing capacity of the people that live there, which places upward pressure on house prices.

Accordingly, with more jobs and growth potential in a region, more population growth will occur, which places even more pressure on demand. Over time, the availability of suitable housing and vacant land will decline. Eventually, supply will be very low and demand will continue to rise – then we have a booming market!

Isn’t debt a burden?

Traditionally debt has been perceived as a burden. But it is important to remember that there are many types of debt. Not ALL debt is to be avoided and not ALL debt is ‘bad’. There is very little in this world that appreciates in value. For instance, we know that cars, boats and jet-skis depreciate very quickly. The overuse of credit cards for luxury items and consumables has certainly become a worrying social trend.  Any debt toward these items is known as ‘bad debt’.

In contrast, on average, a residential property doubles in value every seven to ten years. Therefore residential property is described as an appreciating asset. In addition, as property values rise, so do rental returns. Borrowing for investment is a necessary tool to build wealth and is known as ‘good debt’. It’s one of the few instances where the debt actually works for you.

How much do I need to save to invest in property?

Generally, you need approx $65k of cash or equity to get started in property investing. This amount will allow you to acquire a $450,000 brand new property and cover the 10% deposit and associated costs (stamp duty, lender’s mortgage insurance and legal fees).

What if I don’t have a cash deposit?

When you think of a deposit, most of you think of cash that is required upfront to purchase a property. Cash is not necessary when you have equity in your own home or another property within your portfolio. That property is then used as security against a ‘deposit and costs’ investment loan to acquire a new property.

For home-owners that are first time property investors, they may be an initial concern of using existing equity. This is a perfectly natural outlook. After all, your home is your most important asset, right?

In reality, using the equity in your home to purchase another residential property is considered to be conservative. There is a great and very true saying – ‘no-one ever got rich, without getting into (good) debt’.

For those just starting their property journey, another option is to approach your parents (or another family member) to request they take out a small equity loan from one of their properties, and gift this short term deposit and costs funds to you. Once your new property goes up in value enough, you can access that equity and repay the deposit and costs loan.

Why does Hera Property Group recommend building brand new properties for your investment?

There are five key reasons to acquiring a brand new property:

1. Stamp Duty is reduced when you build a brand new property, as you only pay stamp duty on the land – not the house (as the house does not exist).
2. Depreciation – you receive a higher rate of depreciation on new properties than established properties meaning a better tax return for you, with increased cash flow for each property.
3. Better Tenants – brand new properties attract better quality tenants who are more likely to look after your property.
4. Longevity of the property – properties are built to last 25 years so having a new property will reduce your ongoing maintenance costs.
5. 12-months Builder’s Warranty – if there are any faults in your property during this time the builder will repair them free of charge.

Our property specialists can readily explain each of these benefits to you in depth if you would like further information.

Does the builder have construction insurance?

Yes, we ensure all builders we work with are fully licensed and have all their insurances up to date. These insurances are required by the bank before construction commences.

What if I get bad tenants?

We strongly encourage you to invest in Landlords Insurance to cover the cost of tenant related problems.