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2020 was the year of the unprecedented. 2021 was the year of the unexpected. By 2022, we were used to what the media dubbed “the new normal”. Needless to say, it has been a difficult time for everyone, but it has been especially challenging for investors.

In 2023 and beyond, there is still a lot of market uncertainty, but things seem to be heading in the right direction, especially where the property market is concerned.

If you’re thinking of investing in real estate this year, take a look at these tips.

Is Buying Real Estate in 2023 a Smart Investment?

The real estate market was expected to struggle in 2023. Considering everything that’s happened over the last few years (including rising interest rates), those predictions made sense. But the market has defied expectations, with prices remaining steady. What’s more, experts predict that prices will climb by more than 10% in some parts of the country.

There’s no guarantee, of course, and prices could just as easily plummet. But such is the nature of property investment.

If you’ve been checking rental properties in your local area, you’ll also know that rents are climbing and demand is sky-high. It’s not good news if you’re looking for a new home to rent, but it’s great news if you’re a real estate investor seeking some extra rental income.

Ultimately, whether you invest or not is your decision to make. Check property prices in your local area, speak with financial advisors and property experts, and make a decision based on your budget, preferences, and risk tolerance.

Also, remember that there is an element of risk with every investment. Whether you’re buying gold, shares, or property, your capital is always at risk and you don’t know what’s around the corner.

What are the Main Factors to Consider When Investing in Real Estate?

Whether you’re investing this year or next, here are a few things to keep in mind:

1. Location

Location, location, location—it’s a cliche for a reason. It doesn’t matter how big the property is or how much you spend renovating it, if it’s in an area where no one wants to live, you’ll struggle to make a profit.

By the same token, you don’t want to buy property in an area where prices have skyrocketed and could be primed for a downturn. Look for up-and-coming areas, such as booming towns and cities (like the Sunshine Coast), as well as properties in popular commuter towns.

2. Intended use

Before you start your search, think about what you want.

Are you looking for a dilapidated house that you can repair and sell? Do you want an apartment for rental income? Maybe you’re thinking about commercial properties that you can rent to small businesses. Either way, it’s something you should plan in advance, as it’ll keep you focused on your goal and ensure you’re not led astray.

3. Budget

How much can you afford to spend? How much money will you invest in repairs and renovations? What about the hidden costs?

All of these things need to be factored into the equation. Make sure you leave plenty of money in your budget for hidden fees and expenses, including unexpected repair bills, legal costs, taxes, and all the other costs associated with buying a property.

4. Expected return

It seems obvious but calculating expected returns is something that many novice property investors overlook.

Not every property will make a profit, even if you make substantial repairs and do most of the work yourself. It depends on the property, area, purchase price, repair costs, and eventual sale price. This is something that you can (and should) plan in advance to make sure it’s a viable investment property.

5. Don’t let your heart lead

One of the biggest mistakes that new investors make is to buy the properties they love and renovate them to their own high standards. But if it’s an investment property, you’re not going to be living there and so it doesn’t matter. Let your brain lead your heart.

When buying a property, think about what others will buy; when renovating, focus on making the most necessary changes for the most reasonable costs.

6. Get your taxes in order

Before you think about building an investment portfolio, you need to understand the tax implications, including taxable income, tax deductions, and whether or not you’d be better off buying property through a company.

Contact a professional for more assistance with these matters.

What are the Main Ways Real Estate Investors Make Money with Their Properties?

There are a few ways to make money from real estate investment:

Flipping Properties

Flipping entails buying a property, fixing what needs to be fixed, making renovations and improvements, and then selling it for a profit. Investors try to “flip” homes quickly to avoid falling victim to fluctuating property prices and to turn a quick profit.

However, there are a number of risks, the principal of which is that the repairs can spiral, budgets can stretch, and you may end up selling for less than you paid.

Renting Properties

Successful real estate investors usually have rental properties on their books. Rather than focusing on a quick profit through removal and resale, these properties are rented out for a passive income. The investor can manage the property themselves or high a property manager to do the work for them.

It’s not all plain sailing though. There are insurance costs and property management fees to consider, and things can get costly and complicated if the tenant stops paying the rent.

Commercial Properties

Commercial investors focus on properties that have commercial use, such as office space, restaurants, and retail properties. These buildings can drive much higher income than similar-sized residential properties, but there are additional considerations, such as higher deposits and complicated lease terms.

Speak with a professional before investing in commercial property.

Buying Investment Properties in 2023 (and Beyond)

Real estate investing isn’t for everyone. Bricks and mortar can be a great investment, even in relatively uncertain times like these, but there are no guarantees and there’s always a risk of capital loss.

So, if you’re thinking of building an investment portfolio in 2023, get some professional advice first.

Contact one of our lending specialists for advice on residential and commercial loans.

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