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Buy to Let Property Investment - Australia

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Buy to Let Property Investment - Australia

By - Thursday 01 December 2011

The current real estate market in Australia offers interested investors many attractive and lucrative Buy to Let opportunities. In a typical Buy to Let transaction, a buyer purchases property with the intent of renting it. When a prospective renter becomes a tenant, the resulting rental fees provide a regular income source for the property owner, once the rental fees total more than the owner’s yearly mortgage payments.

Australia as a Buy to Let Real Estate Investor’s Dream

Australia is becoming increasingly popular among real estate investors worldwide as a country with prime opportunities for buying homes and apartment units with the intent of offering them as rental properties. In fact, Buy to Let real estate acquisition is currently considered a wise and profitable option for the property buyer’s market.

To many global real estate investors, the healthy outdoor lifestyle so prevalent in Australia is extremely attractive and compelling, enhanced even further by the country’s size and diversity of terrain and population. With more than 11,000 new residents relocating from Great Britain each year to enjoy the relaxing health-oriented environment of balmy days and clear nights on lovely beaches and breathtaking stretches of lush landscape, there is a rapidly growing demand for rental properties.

Major cities and urban areas also magnetize home and apartment buyers who are concentrating on niche areas where both the local economies and job markets are prospering. Currently, there are myriad valuable opportunities for international property investors along Australia’s western coastline and in North Queensland. With apartment and home vacancy rates in Melbourne and Sydney staying in the sub-level range (currently – 3%), the added conditions of increasing demands and attractive interest rates are drawing widespread attention and active buying from global real estate investors.

Expected Buy to Let Owner Profits in City-Center Locations

In Melbourne, the current rental rate for city-center development units or apartments is approximately AUD 250 – AUD 380 per week for a 1-bedroom flat. In general, a single working person makes a yearly income of about AUD 84,000. After taxes (approximately AUD 25,200), an individual is left with a disposable income of roughly AUD 58,800. He or she would normally expect to pay 1/3 of this amount (which translates to AUD 376 per week) in rental fees.

Using these figures, if the unit or apartment owner’s price for the unit was AUD 230,000 and the monthly mortgage payment is AUD 465, the owner can expect to make a monthly profit of AUD 1,039 on this property, before any necessary repairs or other expenses. A practical analysis of this situation is that such a Buy to Let property, when in a prime location, is providing the owner with monthly investment income at the same time it appreciates in value, while the tenant virtually makes the owner’s mortgage payments. It can also become an off-season vacation home for the owner, by choice.

The Buy to Let Market Climate in Australia

  • Many Australians are finding property prices currently too high for comfortable or even possible affordability. In some prime locations, common property prices may be three or four times greater than residents’ yearly incomes. As a result, savvy investors are reaping profits from Buy to Let property investments.
  • According to records from the Australian Bureau of Statistics, the country’s private rental market supplies housing to approximately 29% of the population, while public housing provides living space for only 6%.
  • Vacant properties considered unaffordable by the general population in an area offer ideal investment opportunities for property investors. In order to insure year-round rental profits, however, investors must choose Buy to Let properties near good schools, convenient transportation hubs, busy tourist centers, or resorts with year-round business.

Short Term and Long Term Buy to Let Properties

It is very important to know which letting strategy is best to use for the property you, as the owner, have purchased. Clearly, the largest income to the owner results from short term rentals during the high (high occupancy) season. However, short term lets bring the additional costs of extra maintenance between tenants. Also, the owner must make the mortgage payments during months when the rental property is vacant.

Long term letting typically makes less money for the owner each month, but in most cases requires less attention from the owner on an ongoing basis. Some property owners prefer long term letting throughout the low, or slow, season and short term letting to higher paying occupants during the high (busy) season. Owners generally find that even during the busiest months, there is still competition. By buying upscale properties in prime locations, investors can best insure consistently high occupancy rates.

Current Mortgage Options for Australian Property Investors

The Australian mortgage market regulations have been revised over the past few years, broadening opportunities, especially for international property investors. Buyers from other countries can now acquire endowment, repayment, or self-certified mortgages on property. Both fixed and variable rate mortgages are obtainable, covering as much as 80% of the purchase price or valuation (whichever one is less), for coverage periods of 5 – 30 years. In addition, loans are readily obtainable at minimal amounts of £50,000 (at 80% level of valuation).

Individual Tax Calculator Australia. – This convenient tax calculator estimates your monthly, semi-monthly, or weekly Australian tax payments for quick, easy reference.

Credit Card Consolidation Calculator. – This handy calculator provides analysis concerning whether or not you should decide to consolidate your debts, especially your outstanding credit card balances. Since credit cards are so generally used to make necessary purchases quickly and easily, many real estate investors now use them to cover incidental purchases and expenses related to investment property repairs and maintenance. For this reason, when consolidating business debts, it is often advantageous to include all current credit card debt.

Search for Property in Australia. - Search for new build and resale property available for sale in Australia and see a buyers guide for the Australian property market.

Article written and supplied by Anna K.

Anna K. is a journalist from Brisbane, Australia. She writes for several blogs about finance topics such as real estate, insurance and several others which attract attention of many readers.

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*This page is provided for information purposes only and should not be construed as offering advice. IPIN is not licensed to give financial advice and all information provided by IPIN regarding real estate should never be treated as specific advice or regulations. This is standard practice with property investment companies as the purchase of property as an investment is not regulated by the UK or other Financial Services Authorities.

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