How long will it take before your property turns a profit?
Making the decision to invest is one that many Australians make at one point or another in the hope of building wealth and securing their future. While there are numerous alternatives, like bonds, stocks and cash, property investment is often considered one of the safest options, especially when employing the assistance of a buyers' agent.
There is no question that real estate has been supplying the majority of Sydney and Melbourne investors with great profits of late. The Pain and Gain report from CoreLogic RP Data shows that of the houses resold over the June 2015 quarter in Sydney and Melbourne, just 2.2 per cent and 3.5 per cent respectively were sold at a loss.
"Property investment is often considered one of the safest options"
This means that in both cases, more than 95 per cent of vendors received a profit – the highest rate in the country. Furthermore, more than 36 per cent of homes from both cities were resold for more than double their purchase price.
CoreLogic RP Data Senior Research Analyst Cameron Kusher confirmed that real estate is proving to be a profitable avenue for investors.
"We've seen the proportion of loss-making resales continue to trend lower over recent months which are mirroring broader housing market conditions where values generally continue to rise," he said.
In light of this, how long will it take to turn a profit on your property?
A long-term investment
Property investment is generally not considered a short-term money-making venture, as the Australian Securities and Investments Commission affirms it has high entry and exit costs, which can include stamp duty, capital gains tax and other legal fees. That's not to mention the price tag of the property! All the more reason to have a property buyers' agent on hand to ensure you're making an informed decision.
In fact, the Pain and Gain report found that across the country, in order to make a profit the average period of home ownership before selling was 9.9 years. Meanwhile, the holding period was 16.4 years for homes that sold at double their purchase price.
However, these are nationwide averages and therefore don't necessarily reflect the individual property markets. For example, the Australian Bureau of Statistics revealed that house prices surged 18.9 per cent and 7.8 per cent in Sydney and Melbourne respectively over the year to June 2015 – both significantly more than any of the other cities.
Bucking the national trend, you could experience the benefits instantly from these substantial gains or even a positive rental yield, provided you have a competent Melbourne or Sydney buyers' agent with potential access to private house sales.
What can you do in the meantime?
If you own an investment property but would like to see the growth rate accelerated, one of the options you can take is improving your property to build its value and potentially the rental yield. In fact, a report from Westpac found that home renovations skyrocketed more than 147 per cent in the four years to late 2014. What's more, NSW and VIC led the charge.
The Department of Industry, Innovation and Science states that provided you make the right renovations, the value that is attached to your property can be substantially more than the cost, thus improving your capital gains.
"The value that is added to your property can be substantially more than the cost"
For example, building an extra bedroom can benefit you in two ways. Not only does it have the ability to significantly increase the price tag of your property, but it will also add an additional source of rent.
Buy my house
If you would like guidance on making the right decision, you should employ the services of a property professional. A competent buyers' agent will have years of experience with an intimate knowledge of the intricate markets within markets in your area.
This isn't to mention the access you could gain to an extensive network of real estate professionals, enabling the possibility of a genuine bargain through private house sales.