Investment Property - Melbourne, Australia

Things are not looking too good in the State of Victoria at the moment, and Melbourne has just announced the weakest performance in its property market for almost a generation. Falling interest rates have helped a little, but not enough to halt falling home prices. This is bad news for home owners, but just might be good news for people who are looking for investment property in Melbourne.

Now you might well think that a slump in the housing market is not exactly the best time to be buying, but that is a little bit like saying that a crash on the world stock markets signals a time to sell up and get out. Remember, you buy when the market is down and sell when it is up!

Now that might be a little bit too obvious, but have you ever sat down and thought about why you really invest in property? A lot of people do so because its a great way to get a tax deduction. That is often true, and it can bring short term gains, but the flip side to getting a tax deduction is that you have to start by spending money. Investing in property however is about making money and not about spending it.

The truth is that you invest in property with a view to getting the best return that you can from that property, not year on year, but over the life of your investment. In most cases that means investing for a minimum of 5 to 10 years.

Now there are a wealth of financial questions that you have to ask and answer before entering into any investment, and it is crucial that you consider such things as how your ownership in the property is structured, whether or not you should consider placing your investment within a trust, and whether or not you should make use of self-managed super funds to gear into an investment property through the superannuation fund. But let's not get bogged down with this just yet.

Your starting point should be to keep things simple. Go back to basics, and ask some fundamental questions.

For example, what is this property I am looking at? Is it in a good location? What plans are there for the development of the area? How appealing is the property to potential tenants? What are the prospects for attracting buyers down the road?

All too often we get sidetracked into looking at property investment in purely financial terms, and forget that the real success, or otherwise, of our investment lies in the people who are going to rent the property initially, and the people who are going to buy it in perhaps 8, 10, 15 or more years time.

Investing in property in Melbourne is as much concerned with the future growth and prosperity of Melbourne, as it is about investing in bricks and mortar. In some ways, the state of the housing market in Melbourne today is neither here nor there. What matters is the future of the area and whether or not you believe that in 10 or 15 years time Melbourne will have grown and be even more prosperous than it is today.

If you do believe this, then now is a great time to be investing in property in the city, and you can start to ask some of those financial questions. For example, if you buy off the plan apartments can you benefit from such things as lower stamp duty and faster capital growth?


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