Wealth Creation - How To Do It, And Do It Well
Creating wealth is not easy, and without the necessary research, can prove costly. In order to secure a good investment property, it takes a lot of planning, foresight, good timing and careful execution.
Before anyone sets out to create wealth from an investment, they need to set a clear strategy about what they want to achieve. Will the investment property be for capital growth, or is it passive income? What amount of money or percentage of income do you want to generate? And what time frame are you aiming to achieve these results in?
Once you have an idea of what strategy you would like to follow, the next step is organising the funds. As the big banks are starting to clamp down on investment lending, approach a mortgage broker who can access multiple lenders, both big and small to find the best loan to suit your needs.
They will also be able to look at all your debts and offer consolidation solutions depending upon your situation.
From there, you need to research where the property market is currently sitting, especially Sydney in comparison to Melbourne and Brisbane.
It has been widely publicised recently that Brisbane is about to experience an upswing in property market values, which reinforces the notion of the “seesaw effect”.
The seesaw effect is the inverse relationship between property prices in the Brisbane and Sydney markets, where pricing in one market will cause capital to move to the other market in search of affordability and better yield. Interestingly, we have seen four previous cycles of the seesaw effect, with each cycle lasting approximately five years.
Research papers published in June 2015 also identified strong drivers for growth in the Brisbane property market, including attractive yields from new residential units.
With so many residential developments being built, location, design, accessibility and rental return are crucial factors to consider.
Introducing the Thornhill Apartments development, of which Coronis Project Marketing is the exclusive agent for.
Investing in an off the plan residential dwelling is not an exotic acquisition. By purchasing a property in a rising market, a prudent investor has the opportunity to enjoy significant capital growth during the project’s construction phase, resulting in greater equity in the newly completed dwelling at settlement.
What we mean by that is a developer’s “sales cycle” will typically go through a number of phases commencing with “pre-sales” and concluding with “sell-out”, when the last lot is sold. Throughout the sales cycle the developer will actively increase the price point for each property in the project to reflect market conditions and demand for the project.
Prices at the pre-sales stage are usually very competitive and intended to drive quick sales, whilst at sell-out they will be fully priced to market and could include any premium that can be demanded by the developer.
An investor who buys at the right time can realise substantial capital growth by riding the developer’s pricing increase throughout the sales cycle. Obviously, the earlier an investor buys into a project, say at the pre-sales stage, the greater the opportunity for pricing increase and capital growth.
A few extra tips to consider about creating wealth through property are:
- Use your head, not your heart when choosing an investment property. Don’t buy a property just because you have fallen in love with it, it must work in with your strategy
- Deal with agents, lawyers and developers that have your interest at heart, not theirs.
- Think medium to long term – you will need longer than five years to generate capital growth
- Look for properties with added value – close to transport, services, shopping centres or if it is in a complex, does it have a pool, gym or visitor car parking
- Stay focused on your strategy and how you can expand your portfolio – always be on the lookout for new deals, financing options and interest rates. Stay in touch with your agent and ask to be notified of any new opportunities.
For more information on wealth creation using project developments, please contact our Project Marketing Team on (07) 3828 2080 or our Financial Services team (07) 3105 2060.