Owners of an investment property have been popularly characterised as retirees, the filthy rich or the overseas mogul. However, Australian property market trends have revealed a new player in the acquisition of investment realty – the techno-savvy, multi-taskers of Gen Y.
What we shall explore are some of the reasons why young people are choosing to invest in property and some of the market trends they are establishing. Also, to help those interested in investing in real estate, five very important investment tips shall be discussed.
Why Young Australians Choose to Invest in Property
In the past, young people were seen to be more concerned with saving money for overseas trips, buying a new car and moving out of home into a shared rental facility. Young people today, however, are choosing to stay at home longer (where they rarely have to pay rent) and pour a large portion of their wages into an investment property.
Young people (in remaining at home) are seeing this arrangement as a viable way to simultaneously save money and reap the rewards of rental income and capital growth on their investment property. Already parents around the country are crying to bring back that feeling of an empty nest!
According to many property analysts, the high rental returns and the affordability of houses in certain market hot spots has meant that real estate has become a profitable way to financially grow one’s wealth. Furthermore, many other forms of investment, like shares and bank term deposits, have performed worse since the Global Financial Crisis. The young, therefore, are cashing in on this current property market climate.
Worrying Trends for Young Investors
There are some worrying trends emerging in the property market, concerning young investors and the way they are managing their investment properties. Every year 25% of investors sell their investment properties within a year of buying it and this figure mainly consists of those in the Gen Y age bracket. It seems young people are selling their investment properties prematurely and missing out on a lot of potential capital growth and profits.
The reasons for young people not staying in the property market long enough can be anything from overstretching themselves financially to just sheer inexperience. This is why it’s important for young investors to get in touch with the right professionals who can provide them with legitimate property investment advice.
5 Tips for Young Investors
To help educate young investors, here are five important tips when thinking of getting involved in an investment property:
1. Seek expert advice from a range of professionals on property investment. Also, it never hurts to do your own research as this may help ensure that you are getting the right advice and not falling for a sales spin.
2. Develop an investment strategy or plan before you invest in a property. This will make managing your property easier and will give you a greater understanding of what you can afford (which leads to the next point).
3. Make sure you can afford it. Don’t overstretch yourself too much financially as you may need to initially support your investment property with your own cash.
4. Make sure your job is secure. As with the previous point, you need to have a steady cash flow to ensure you can support any short term losses on your investment property.
5. Try to stay in for the long haul. If you sell too early, you could be undercutting your potential profits.