We have had quite a few expat clients over the years looking for investments, homes to return to or a combination of both. The combined briefs have always been the most tricky as often the criteria for home and investment are mutually exclusive – but each situation is unique and a big factor is the budget.
The reason the budget is potentially an issue is that yields (percentage of rent to property value) drop quite significantly after a value of around $1.2M. So if you are thinking of spending under $1.2M you have a better chance of buying a property that will provide the sort of return expected for an investment property (until recently we have been targeting 5-6%). The traditional drop in expected yields for properties worth over $1.2M is further exacerbated right now because the rental market is going through a change due to the phasing out of the Living Away From Home Allowance (announced in the last Federal Budget) and rents are dropping across all price ranges but especially above $1000pw.
However, if your budget is in excess of $1.2M and your primary objective is to secure a future home, you need to establish other criteria over and above pure investment. For instance, we may recommend that a 2 bedroom apartment is better for investment than a three bedroom, but you couldn’t fit your family into a 2 bedder. Or you may be a mad surfer who HAS to be within a 5 minute walk to the beach and, while you will always find tenants for such a well-located property, they may not pay a premium in rent that reflects the extra money you will need to pay to buy a home in that position. So the compromise will quite often be a lower yield. That said, capital growth is a crucial factor in most investments and we believe that all property buyers should approach the purchase of their own home with the same requirements for capital growth as they would for an investment property.
I don’t want to bore you too much with how we establish potential for capital growth – but it basically boils down to whether a property will be attractive to future buyers. Sounds simple, but this is really where our previous experience as selling agents is at its most useful.
Obviously another key issue here is your tax situation and it would pay to get advice from your accountant prior to your property hunt.
Published:- 10 July, 2012
Please note: Good Deeds buyers tips are intended to be of a general nature. Please contact us for advice that is specific to your individual circumstances. You may also need to get advice from other professionals such as an accountant, mortgage broker, financial planner or solicitor.