Investing in property is not merely doing a search on Real Estate.com then going to an auction and bidding with 50 other people to get the property. It requires a certain level of understanding that many people don’t realize when they try to do it by themselves.  Everyone wants to jump on the band wagon and own property but what are the things that you need to understand before taking the plunge:

Property Cycles refers to the different stages of property demand and therefore performance and how long it will take for your property to double in price.

Historically property has doubled every 10 years but of late cycles seem to have shortened as more and more investors get into the market.  Now it appears that cycles are between 7 to 10 years depending on the location.  Properties in prime locations will generally double in a shorter period of time than properties in less attractive locations.

The market peak represents the top of level of prices that properties have reached, which is then followed by a market downturn. This will then be followed by a stabilization period where performance will be average for investment properties, then we can expect to see an upturn in prices which means an increase in prices.  This is the best time to buy and Australia’s current property cycle is indicating Melbourne and Brisbane to be good locations at the moment for buying property. After an upturn, there is sometimes a property boom and after the boom, the market may plateau or have a downturn (depending on how much of a boom there was).  A lot of time property may just stagnate for a little while before going up in value again.  Often demand will be determined by a shortage of stock in an area or interest rates can impact the length of the property cycle.  Investors need to stay in the market for an entire property cycle, or the time it takes for property prices to move between boom and bust phases. Understanding the property cycle is the key to exploiting any market opportunities.

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Investment Term is the length of time you will be holding your property for. The main rule to remember is to invest for at least five to ten years.  Generally speaking, Property Investment is about long term capital gain and leveraging from the tenant’s rent to pay the mortgage of your property.

As BIS Shrapnel’s director of building and construction Robert Mellor says: “all property investors need a long term view. But there is long term and there is long term, depending on which point in the cycle you buy.  “Buying just before prices start rising means your view doesn’t have to be as long term as if you buy when prices start falling.”  The OHL Group does it’s research especially so that we can choose exactly which location is going to be in upturn.  This enables us to select ‘Emerging Hot Spots’ for our clients so that the maximum capital gain can be obtained in the shortest period of time.

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Measuring the Financials is absolutely imperative for a person to know if they can afford 1 or more properties, ie. how much they can borrow and how much to allocate for future costs.  Part of the OHL Group process is to explain exactly how the financials are measured and offer an entire assessment of your situation so that you know exactly what is possible and when it’s possible to achieve financial freedom.

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Negatively Geared & Positively Geared Property refers to whether you will be out of pocket at the end of the financial year or have more money in your pocket from your investment.  Initially when people purchase an investment property then can often expect to be in a negatively geared position whereby they can take advantage of the tax advantages and obtain a rebate from the government based on their marginal tax rate.  In a few years as rents go up, your property will become positively geared so that eventually you will be living off the passive income that your property will be earning for you.

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Should you buy 1 Property or a Portfolio of Properties? This depends on your individual goals.  At the OHL Group, we assist people in buying a Portfolio of Properties so that they can retire early and live off the passive income their portfolio generates or just become wealthy with property.  The OHL Group process can enable investors to purchase a property a year based on the experienced strategies of the team who have over 15 years experience in property investment.  This means that you could have 5 properties in 5 years and 10 properties in 10 years.  Imagine living off the passive income of 10 properties.  That is a wealthy lifestyle indeed.