It’s hit the Herald Sun! People will soon believe how cheap it is to buy an investment property and what a good time it is to do so.

That does not make every property a good buy. What may suit owner occupation make not necessarily make for a sound investment. It’s worth protecting yourself by getting professional advise. Mistakes can be costly.

Professionals can help you ensure that the numbers stack up before securing your investment. It seems like a good idea to get in before the rush and while interest rates are dropping.

 Article from the Herald Sun below:

“When numbers add up, investors return”

Author: Mark Armstrong
Date: November 30, 2008

The best time to enter the residential investment market is when the numbers stack up. This boils down to one thing: the difference between the interest rate you’ll pay, and the rental return you’ll receive. Currently, the gap between holding costs and rental returns is narrowing and I expect this will continue for the next six to 12 months.

This provides an ideal window of opportunity for first-time investors to enter the market and buy at competitive prices before the broader mass catches on to what’s happening, enters the market in droves and drives up property values again.

Back in 2001, the rental return for many Sydney investment properties was about 4 to 5percent, while the Reserve Bank’s official interest rate fell throughout the year and bottomed out at 4.25percent.

Taking into account retail lending margins, the difference between holding costs and rental returns equated to approximately 1 to 2percent of the property’s value. The numbers attracted investors, who began competing aggressively and drove property prices sharply upwards for the next two years.

By the end of 2003, however, the cash rate had risen to 5.25percent, while rental returns had dropped to 3percent in the wake of strong investor competition and property price rises. The difference between holding costs and rental returns widened to about 4percent of property values. By early 2008, multiple interest rate rises had widened the gap to 5 to 6percent.

Meanwhile, the lack of property investment activity had left the rental market in historically low supply, with vacancy rates of less than 1percent in some areas of Sydney and rents were being pushed up substantially.

By mid-2008, the tide had turned again. The official cash rate stood still after peaking at 7.25percent in March, and began dropping sharply from September. High rental prices have seen rental returns climb back to 4 to5per cent of property values.

With every indication that further cuts are likely as we move into 2009, the cost of holding investment property is falling once again to levels not seen since the last property boom.

Source: The Sun-Herald