What should I look for in a house and land investment? Ask Margaret

Hi Margaret,

My partner and I are thinking of buying our first home by the end of this year and are currently researching on where to build, the demographics, etc which will suit our budget.

We are from WA and are thinking of going for a home and land package. Therefore will you have any piece of advice as we are newbies to the property market and believe that extensive research needs to be conducted before we embark on this journey.

Is there any of your books that are specifically targeted towards first home buyers.

Regards,

Amira

Margaret's answer on the next page. Please click below.

Hi Amira,

It's really important to understand that the parameters around how we choose the home we wish to live in are not the same as those we choose the home to invest in.

If you were buying purely for an investment, it's more likely that you would not invest in the same kind of area that you would choose to buy in as an owner occupier.  This is because, at any moment in time, some areas make better investments than others due to the existence of growth drivers which have not yet had a big impact on that market.

If you were choosing to invest you would be looking for areas which are not yet fully serviced, yet show signs of increasing population, infrastructure and popularity. These areas then have a good chance to grow quickly and you will benefit from that by having an investment which grows well.  If you are looking to buy a home to live in you would be looking for an established area which most likely already has had some good growth - you choose it for the convenience and lifestyle benefits it can provide to you and consider its potential to grow as a secondary requirement.

You want to buy in WA, and most residential areas in Perth have had a good run last year, with prices softening this year.  Therefore, as an investment it's not as good, at this moment in time, as say, Brisbane, and so you would most likely not choose a Perth suburb as an investment right now.  But as you want to live there, your aim instead should be to find something within your budget which also allows you to meet all of your lifestyle needs - a decent proximity to your work, near family and friends and close to any of the things you like to do in your leisure time, such as go to the beach, go bushwalking etc.

As you are choosing a house and land package, make very sure that the total price to build this house does not exceed the current price for similar, established properties which are already built.  Often there is a builder premium which you cannot recover through market growth, as this house will only have the same value as similar established houses once it is built.

Then, make sure that you get the right type of loan, right from the start, one which is flexible and will allow you to redraw anything you pay off it to make a deposit on an investment property.  You want to be able to pay down your loan as quickly as you can so that the combined effect of debt reduction and market growth of the property creates the equity you need to get started with a property investment portfolio. 

While my books don't specifically help a first time owner occupier, the latest one, How to Achieve Property Success, which is a combination and update of my first three books, definitely helps you to undertake effective mortgage reduction and prepare yourself for starting on your property investing journey. 

Regards,

Margaret

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