The banks continue to crackdown on investor home loans where the standard variable interest rate on residential investment property loans have increased and the loan-to-value ratio lending is 95 per cent to 80 per cent, meaning much higher deposits.
It comes almost six months after the Australian Prudential Regulation Authority announced a major overhaul to investor lending, which has continued to ignite house prices particularly in Melbourne and Sydney.
Mortgage Choice CEO John Flavell said, “The ability for credit for investment purposes is getting tighter and harder, that’s going to restrict the amount of money people can access for investment properties.”
So the question is how do you create wealth in light of all the above changes?
In ‘Secrets of the Millionaire Mind’, it explains the way wealthy people think differently or have a different mindset. One has to think of strategies outside of the box and development can provide the answer to that question.
Is it a good time to develop now?
You bet it is! Property development is the only vehicle where you can develop and own at cost price. It’s like buying directly from the factory, no margins from wholesalers or retail shops! Property development is a proven, long term strategy to accumulate wealth. It is well known that property values double every seven to ten years.
Where do you start then?
Property development is dependent on fundamental criteria: management and finance skills.
Management criteria is dependent on three primary areas of focus:
- Time Management
- People Management
- Money Management
You have to efficiently manage the project to secure a higher profit margin. It is essential you don’t get behind on your emails and make sure you give feedback as soon as possible, or else you run the risk of delaying the project which will end up costing you money.
Do the Sums.
Normally the process is you find your site and talk to the owner or agent about an asking price from the vendor. Ensure you do proper research so you don’t overpay. Research can be done via talking to real estate agents, looking at property sales online sites like RP Data, Price Finder or Investar.
Start with the initial analysis to determine if the project will be feasible or not.
Identify what you want to do with the block of land:
- What is the size of the land?
- What is on the land currently that can add value?
- Renovating the existing house?
- What is Council zoning, can I sub-divide the back of the land and sell it off, or can
Is it feasible to build a granny flat on the property to secure an additional rental income every week?
Crunch the numbers before you even consider making an offer to the vendor.