Investors should focus on location, location, location this financial year

Low interest rates and relatively affordable property prices in Perth has resulted in strong activity by property investors in the Perth proprety market during the early months of the current financial year (2014/2015).

The latest figures from the Real Estate Institute of Western Australia (REIWA) show that the median price of a home in Perth quarter is around $540,000 during a time of record-low interest rates.

Property prices in WA still remain competitive and this has been highlighted by a national survey of Australian house prices by Moody's Analytics that revealed that our property market is now the second most undervalued city in Australia next to South Australia.

Affordable house prices in WA, and in particular Perth, is encouraging more property investors to buy real estate as they understand that over the long term they can be assured of high levels of capital growth.

With the start of the new financial year, it is expected that a large number of new property investors will enter the market for the first time seeking to buy properties that will deliver good rates of capital growth and rental returns.

Western Australia's relatively high wages and tax levels will also be a major factor in more wage earners buying more properties during the coming financial year so they can both reduce income tax and also boost their personal wealth creation.

The financial reality is that the for the average person their greatest financial outlay is paying direct and indirect taxes every year.

Buying property is a proven way of minimising this tax burden especially for high income earners who may be involved in the resources sector.

If you are considering buying an investment property for the first time, then should consider the following points:

Location, location, location

Beachside and near-city suburbs have traditionally delivered investors high levels of capital growth over the long term. Currently, there are a large number of properties for sale in beachsides and near-city suburbs that can be purchased at very competitive prices. Prime beachside suburbs include Doubleview, Scarborough, Rockingham, Waikiki, Safety Bay, Warnbro and to the north, Yanchep, Clarkson and Craigie offer good investment opportunities. Near-city suburbs primed for growth include Victoria Park, Ballajura, Bayswater, Cloverdale and Queenspark.

Capital growth
Check of the long-term capital growth of the suburb. These figures are available from REWIA. The median house price growth rate for the last 10 years is a good indication of how house prices are likely to perform during the coming 10 years.

It is important to remember that an annual price growth rate of a home which is two per cent higher than a similarly priced home in an alternative suburb can mean the difference in total capital growth of $100,0000 over a 10-year period if both houses are currently valued at $500,000.

Walk before you can run
Your aim should be to buy a number of investment properties to build personal wealth. Start by purchasing an affordable property and after some experience behind you gradually start to build a property portfolio. For example, you might consider buying an older-style apartment in a coastal location and renovating the property to boost rental returns, and then with the additional income you can consider buying a second investment property.

Pre-finance approval
An investor is in a much stronger position to negotiate the price of a home if they have pre-finance approval. It is important to have an equity facility to cover a rainy day especially if you are buying an older-style property. That is an amount to cover those unforeseen expenses – vacancy, maintenance/repairs.

Rent
Check the rental vacancy rate and average weekly rent in the local area for the type of home you are considering buying. This information can be supplied by reputable local property management companies or by just checking the for lease advertisements.

Rental income is a key factor when buying an investment property because it will assist you in helping to service your loan and can determine the resale price of the home at a later stage.

Management
It is equally important to have your property professionally managed. Selecting the right tenant for your property is a key service a property management company can offer. It is also important to have landlord’s protection insurance.

About Rory O'Rourke

Rory O’Rourke is the principal and licensee of O’Rourke Realty Investments in Perth and has been in the property industry for over 40 years.

Rory is a former Vice President of the International Real Estate Federation (FIABCI) Australian Chapter and was inducted into the International Who’s Who of Professionals for 2009/2010.

He has authored 3 bestselling books ‘Born Free Taxed to Death’, ‘I sold 22 homes in one day’ and ‘It’s Time… the Republic of Australia’.

These books can be accessed at https://www.orourke.com.au/books.html