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How to make your property investment profitable

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Buying an investment property in Australia can be a great way to earn additional income, diversify your investment portfolio, and take advantage of the growing real estate market. The possible high return on investment, tax deductions, and positive cash flow are also huge advantages for potential investors.

With so many different types of investment properties out there, finding one that fits your goals can be a challenge. In this article, we outline the most common types of property investments in Australia to help you figure out which is the most profitable real estate niche for you.

Types of investment properties in Australia

Investment properties in Australia come in various shapes and sizes. Finding the right property that fits your needs is a must.

Rental property

A rental property is a piece of real estate bought by an investor with the purpose of renting it out.Rental properties could be residential (e.g., apartment buildings, single-family homes, townhouses, etc.) or commercial (e.g., office spaces and storefronts). These properties could be inhabited by tenants on a lease or another kind of rental agreement.

As investments go, this is one of the more popular options among investors for several reasons such as providingconsistent cash flow while the property appreciates in value over time and its flexibility. Plus, investors can choose different ways to rent it out.

The rental yield a property generates depends on the location, property type, and maintenance costs. Of course, managing tenants and other landlord responsibilities come with owning a rental property so best keep that in mind before investing.

Pros of Buying a Rental Property

Cons of Buying a Rental Property

  • Rental income

  • Possible tax deductions

  • Less volatile investment

  • Property likely to appreciate in value

  • Offers flexibility

  • Maintenance costs

  • Tenant management

  • Lack of liquidity

House flipping

House flipping refers to buying a property with the intention of renovating it to increase its value before putting it back on sale. Depending on the property, house flipping could be basic repairs to a rundown house or a total makeover with new features and amenities.

This type of investment property is great for investors who know a lot about the real estate market and construction already. It is also ideal for those who want relatively quick short-term profits.

With the right timing and industry knowledge, house flipping can generate significant returns. Make sure to do your research and understand your potential investment before taking on house flipping as your next investment.

Pros of House Flipping

Cons of House Flipping

  • Relatively quick to generate profit

  • Smart renovation choices can increase profit

  • Take advantage of market trends

  • Helps expand your professional network

  • High-risk property investment

  • Holding costs could accumulate

  • Stressful process

Vacant land

Purchasing vacant land is not the most exciting property investment, but it can give you excellent returns if you play your cards right. A vacant land can become a good long-term investment because you do not have to worry about maintenance costs. If you decide to buy smaller parcels of land, you won’t have to take out too big of a loan either.

Typically, competition for vacant land is not as high as already built properties. With low competition, you are likely to get a better deal. If you time your purchase correctly, you could see the value of vacant land increase exponentially in a short span of time. Vacant land also provides investors options to either build on it, resell it as is to a developer, or rent it out.

Pros of Buying Vacant Land

Cons of Buying Vacant Land

  • Low cost of entry

  • Possible tax deductions

  • No maintenance or holding costs

  • Long-term value appreciation

  • Slow value appreciation

  • Insurance costs

  • Difficulty finding buyers

  • Not all lenders offer land-only loans, such as loans.com.au

Do’s and Don’ts: Investment property tips to maximise profits

Before buying investment property in Australia, you need to be prepared. Make sure you get the most out of your property investment by following these simple do’s and don’ts:

Do assess your investment strategy

The best way to make the real estate niche you choose profitable is by doing your research and ensuring that your investment strategy is sound. Check out growth-trend indicators for any potential property investment opportunities. Know that capital growth in cities like Sydney, Brisbane, and Melbourne are different.

Always look into the area you are investing in to get the feel of the local market. If you are investing in a rental property, for example, it pays tosee what the rental market is like and scope out the competition in the area.

Don’t let your emotions get the better of you

When investing in real estate, being calculating and analytical is a good thing. Approach your property investment like a business toget the best outcomes. For instance, if you are flipping a house, do not fall in love with the property so much that your judgement of its value is clouded. Be smart and objective about your investment so you are less likely to make mistakes and maximise your returns on investment.

‍Do consider the additional expenses

This includes stamp duty, taxes, loan repayments, insurance costs, construction costs (for house flipping), maintenance costs and property management costs (for rental properties). Before you buy an investment property, assess the potential expenses to see if the property is worth it. The best way to get a return on your investment is to know what potential expenses there are and prepare for them.

Don’t ignore current market trends

The lease terms on your investment property should reflect the current market while matching your investment goals. No one wants to leave money on the table by undercharging on rent. On the other hand, you are likely going to put off potential renters by overcharging.

Meanwhile, for house flippers, the type of upgrades and renovations you make on your property should align with the neighbourhood. Check in with the latest local real estate news for more information.

Do get the right investment property loan

Finding a good low rate investment property loan is a great step toachieving your investment goals. Look into different investment property loans out there and compare rates. This will give you a better idea of what types of loans are in the market. Take your time to ensure you find an investment property loan that fits your needs.

Buy your investment property today with loans.com.au

Get in touch with us today for a hassle-free loan application process. Save money on your loan and get the most out of your property investment today!

About the article

As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.

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