Welcome! COVID-19 has reshaped the investment world and will the effects will continue to ripple through every industry. No matter the investment product or opportunity. However, property investments continue to be, one of the best ways to invest. History provides hope for property investors, Duncan Hughes Australian Financial Review.
"Never invest in a business you cannot understand" - Warren Buffet
To help you prepare for when times are better, we've created this guide to help foreign investors like yourself to understand the finer details of investing in Australian property as a foreigner.
If you are a complete beginner, or just curious about opportunities for property investments in Australia, this is for you. However, if you are a seasoned investor, you may find some useful links in here as we list the best free resources to supercharge your investment journey.
Alternatively, if you would like to learn more about how this will fit your personal situation speak with one of our strategists to not only learn about your options for Australian property investments but also to receive a free consultation. Contact us or drop us a PM on Facebook to get started.
Why Australia?
Australia is a robust economy and is expected to strengthen amidst the Coronavirus outbreak (Reserve Bank of Australia 2020). When investing in property choosing a country with strong fundamentals is important to avoid (Evaluating Country Risk for International Investing, Brian Perry Investopedia).
Although there are big metrics and big issues to consider you also want to consider the following when deciding if investing in a property in Australia is good for you:
A. If you are considering rental opportunities, one target segment you may consider is rental for student accommodation. You want a country that has an excellent opportunity for children to study at globally ranked institutions with access to extensive student support services.
B. You want a country that has advanced and efficient healthcare services. Which is an indicator of economic strength.
C. You want to be part of a robust mature economy that provides stable job opportunities and has plenty of fresh air and access to beautiful unspoilt nature. For higher income growth and balanced lifestyles for people to do well.
As a foreigner can you buy Australian property?
Generally, yes investing in Australian Property is fairly easy. Usually, the government (Foreign Investment Review Board) accepts foreign investments from most countries. Most major countries in Asia can invest in a property in Australia. However, as a rule of thumb, I recommend investors to consider the availability of finance to a foreigner of a country's income source as a litmus test to determine if investing in a property in Australia for your income nationality is easy.
Currently, offshore income generally accepted are:
Brazil
Canada
China
France
Germany
Hong Kong
Indonesia
Malaysia
Japan
Macau
New Zealand
Singapore
South Africa
South Korea
Switzerland
Taiwan
United Kingdom
Vietnam
How do you start investing in property in Australia as a foreigner?
Establishing the basics is critical. You need to learn the mindset of property investing before jumping in. Investing in property can be very risky and very expensive. Any investment into property is as good as a commitment of 30-years (considering the length available for an Australian home loan for foreigners).
[Step 0]: Before diving into tactics and investment theory, here's something for you to start on right now. This will help you to learn and absorb better. the Feynman Technique and the Trunk Method. As you will be learning a lot about technical property rules, norms culture and more related to Australian property. We've found these 2 methods to work when you need to remember the a lot of information you have learnt.
[Step 1]: Investing in property is similar to investing in a business. There are times when properties do very well, and times when properties have to generally improve their strategies to grow. One way to understand about this is by learning about the property investment cycle: Detailed guide on Property Investment Cycle here from Motley Fool. Details on Australia's property investment cycle can be found here.
[Step 2]: There are a plethora of investment properties to choose from, so I recommend learning about general rules of thumbs to help you quickly screen through deals and narrow down on your options here. This great video on YouTube explains in further detail: 2%, 50% and 70% Rule.
[Step 3]: After narrowing down to a few choices, next is to determine your selection criteria for your investment property. For example, if you have the goal of renting your investment property, you've identified that the area surrounding your target property is student-based. Therefore, you would look for properties that are able to satisfy this market. More on this is covered here in this article, Important Factors when Investing in Real Estate.
The top 4 actions you must take before investing in Australian property.
As with any country, purchasing or investing in property has different rules, norms, and culture. Here's a shortcut to lead you in the right direction as you prepare to invest in property in Australia.
[Action 1]: Understand what types of property you can or cannot invest in as a foreigner. Generally, only newly developed properties are available, most foreigners can't invest in second-owner properties unless they have a qualifying visa. More info on this here through the government's website: Foreign Investor Review Board (FIRB). You can apply here and here's a calculator to estimate the fees you which will incur.
[Action 2]: Learn about the current market property and rental prices: Australia's largest and most popular property portals Domain and realestate.com.au.
[Action 3]: Understand that there are different stamp duties for different states. Here are links about Australia stamp duty for foreigners organised according to state: Victoria, New South Wales, Western Australia, Queensland.
[Action 4]: Research on general market sentiments on the market for your intended investment property. You want to research on what locals think of the area and generally research what are acceptable market rental rates. Do this on OzBargain and Gumtree.
Investing in a property in Australia made simple
This is the easy guide to helping you understand the steps to making a purchase on your investment property.
[Stage 0]: After you have done your research (this is discussed in detail above). You want to determine your investment strategy. (1) do you intend to invest with your own money, or (2) invest with other people's money? This is fundamental as it will determine what are the key next steps you must consider.
[Stage 1]: Choose a property. There are many Australia property for sale. You can find them in your local country too. There are always events on Australia property held in Singapore, Malaysia, Indonesia, and more. Some great property agencies to look up are Metricon, Frasers, Jalin, CSI Property, and many others. Alternatively, you can speak with us to learn more about the market before making a purchase.
[Stage 2]: Before committing to your investment purchase it is important to first appoint your solicitor or conveyancer. This person will represent you when you purchase an investment property in Australia, help you to ensure the contracts are in correct order and you are within your legal rights when making the purchase. Speak with your agent or you can contact us for a recommendation.
[Stage 3]: When you are ready to make your purchase you can make a formal offer to the developer or with the agent. This is when you will make a reservation deposit.
[Stage 4]: Signing of your purchase contract, payment of your first deposit and application with the FIRB. The contract of purchase is usually called the Contract of Sale and the typical deposit for your purchase is 10% of the purchase price.
[Stage 5]: Your Purchase is complete. Now all you need to do is wait for the developers or your sales agent to inform you when settlement is close. Settlement means that your new investment property is close to completion and you are required to pay the balance (90%), stamp duties, and balance legal fees.
Important information for Australia home loans for foreigner
If you are considering to use other people's money when you invest in your Australian property. It is more difficult to obtain finance because big banks have restricted their lending to foreign property investors since 2016. However, private mortgage companies (licensed by Australian Securities and Investment Commission) have seen an opportunity to serve the foreign property investment market.
The cost of loans for foreigners is notably higher, as the cost of obtaining and derisking funds to loan out are expensive. However, with strict government regulation, this has been controlled to a certain degree.
Typical rates in the market (latest as of 1 April 2020):
[LVR]: up to 75%
[Variable Interest Rates]: from 4.90% and 7.50% (rates are dependent on risk, facility options and LVR)
[Tenure]: up to 30 years
[Total Fees]: up to 5% of the loan amount (including legal disbursements, but excluding stamp duty)
Speak with us for further details with regards to your personal situation.
Are you ready to start your Australian property investing journey?
Asia continues to have a strong demand for Australian property, because of diversification, currency strength, and growth opportunities (Australian Property: what to know before you invest - Kew, N 2020). Start your property investment journey by contacting us today. Contact us online or PM us on Facebook for more information.
More information on how we can help you is available here on our website.
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