For most investments, an increase in wealth is the most ideal outcome in both long and short-term scenarios. However, there are going to be dangers and pitfalls that you should try to avoid, especially if you are a first-time property buyer and don’t have a great deal of knowledge in this area.
Property investment risk should not be underestimated. The consequences associated with them can be financially severe and leave you with long-term problems to deal with. Thankfully, there are some tried and tested guidelines that may help you to reduce property risk when it comes to your investment.
Carefully consider the current state of the housing market
Before you invest too much of your time (and any money), ensure you fully examine the current state of the housing market. Prices in the housing market flow through time in waves; meaning generally you should not invest when the prices are at their highest point.
Doing so can cause your property to fall into negative equity if house prices crash. In most cases, you might then be locked into paying a higher interest rate on your loan for a property that’s no longer worth as much as when you first purchased it.
Avoid making fast, get-rich-quick investments
During your research into properties for sale, you may come across ‘hotspots’ such as mining towns that offer the chance for quick financial gain. However, buying a property in a city can help to lower your property investment risk as house prices will rise at realistically sustainable rates and are less prone to crashing in the way prices in a mining town could.
Make the most of Australia's current interest rates
Paying over the odds for your interest rate is a sure-fire way to eat into your investment and expose yourself to more financial risk. Australians across the country are currently investing in properties or refinancing their home loans while interest rates are at such historically low levels.
So, make sure you do your homework and really shop around for the most favourable interest rates out there. Also, don’t forget to investigate any potential fees and the term lengths. The last thing you want to do is fall into the trap of losing more money in unexpected costs that you save with the low-interest rate.
Consider mortgage protection insurance
No matter how much you try to reduce the property investment risks you face, there’s no way to guarantee that you won’t fall seriously ill, become involuntarily unemployed, injure yourself, or even die. If this happens, you don’t want to be forced into selling your property as the return might not be in your favour. A mortgage protection plan could give you peace of mind and provide you with financial support during a range of serious life events.
Take a look at how an ALI Group Loan Protection Plan may reduce your property risk and keep your investment for the future secure.
Loan Protection Plan is jointly issued by Hannover Life Re of Australasia Ltd ABN 37 062 395 484 (Death, Terminal Illness, Living and Accidental Injury Benefits) and QBE Insurance (Australia) Limited ABN 78 003 191 035 AFSL 239545 (Involuntary Unemployment Benefit). It is distributed by Australian Life Insurance Distribution Pty Ltd ABN 31 103 157 811 AFSG 226403 (ALI). ALI receives commission for each policy sold. Any advice provided is of a general nature only and does not take into consideration your personal objectives, financial situation or needs. You should consider the Product Disclosure Statement when deciding if this product is appropriate for you.