Investing in property in South Australia, and the nation more broadly, can be one of the safest and most sustainable pathways to building wealth.
The country’s growing population fuelled by higher than average immigration numbers have driven our post-Covid property boom.
In Adelaide, the average house delivered an annual increase of 5.3% in the decade between 2013-23.
The average house price of $375,000 in December 2011 had almost doubled to $740,000 by December 2023.
The capital gains, married with the positive returns provided by rental income are all but guaranteed to land you on the road to success.
But not all roads are the same.
There are superhighways paved with gold, and dangerous, beaten tracks, littered with potholes that can make your ride particularly bumpy.
Here are the wealth building fundamentals for owning property in Australia.
Choose your property finance strategy
When considering to invest in property in Australia, you need to formulate your desired property finance strategy – usually this is a choice between capital growth or cash flow.
Industry professionals may advise you differently on the superior strategy – most will have skin in the game.
If you are building wealth in the long term, capital growth should be the lever you pull.
By owning property that consistently grows in value, year upon year, you build an investment portfolio that will sustain you for the rest of your life.
Cash flow is usually focused on seeking positive rental yields that exceed expenses, rather than looking to build longer-term capital growth.
But understand, you cannot have capital growth without some level of cash flow.
You must be able to afford to meet your mortgage repayments or risk losing your asset.
Wealth building pathways with property
There are a number of ways you can build your wealth by owning property in Australia.
Buy and hold – This is one of the most popular strategies across all investor demographics.
It often involves buying a property with long-term capital growth potential, letting it increase in value over a number of years, and then leveraging the equity to buy more property.
Or, when the time is right some years down the track (usually around retirement), you sell your long-term property investments to cash in on the growth and fund your future.
Positive gearing – This is when your rental income generates a profit, helping you pay off your loan faster.
There may be some downsides.
Firstly, in Australia, rental profits are often slim – this can make it hard to really generate much growth of note from your investment.
Also, properties with higher rental yields tend to deliver lower capital growth rates, so you’ll need to bear in mind that short-term gain may come at a long-term cost.
Negative gearing – It is a strategy best suited to people in higher tax brackets.
If your rental income fails to cover your mortgage, the difference can be used to lower your total taxable income, so offering significant tax benefits.
It allows investors to purchase properties with greater growth potential.
But because the rental yield fails to cover your borrowings, hence you’ll need funds to cover the balance of your mortgage payments.
Renovate and hold – Renovating houses is a full-time job for some.
It’s a great way to quickly build your equity in a property but you’ll normally need some experience and contacts within the industry.
A renovated property can then be rented to positively gear your investment.
The trick is buying the right property in the right suburb to maximise your return.
Renovate and sell – “Renovator’s delight” anyone? Real estate ads with this hackneyed line are appealing to investors with this strategy.
As above, you’ll need experience within the industry and a good eye to spot the diamond in the rough.
And while it can produce high returns, it comes with higher risks.
These include unexpected challenges with the makeover as well as Australia’s rising building and labour costs.
Building – Buy the land, build the property, take your profit.
It’s pretty simple maths and works for a lot of investors.
A brand new home will also offer a higher rental yield which should allow positive gearing.
Subdividing – Buy a property big enough to subdivide, split it into two or more pieces and sell off those pieces for greater than the initial sum.
Again, it’s simple maths but it does require some experience in property development and that involves councils, their planning rules and lots of red tape.
Subdividing, surveying and anything involving local councils also attracts a range of fees that can quickly eat into your bottom line.
Professional guidance for your property portfolio
If you’re serious about investing in property, you need to treat your venture as a business.
That means you’ll need a business plan, identifying which strategy you want to follow.
You’ll need to keep track of all the ins and outs, your expected returns, take out insurance to protect your investments and source trusted professionals to enlist to help with maintaining your property portfolio.
They may include lawyers, conveyancers and reliable tradespeople to work on your sites.
They should also include an experienced mortgage broker and financial adviser.
Mortgage broker – When you are borrowing large sums of money for investment purposes, you want to be sure you have the best possible deal.
That means not just the lowest rate but a mortgage that offers the flexibility and portability that you need.
Financial adviser – Diving into any investment strategy without talking to a trusted financial adviser is fraught with danger.
When making any kind of large financial commitment, it’s critical to talk with an experienced industry professional to discuss its merits, sustainability, tax implications and your exit strategy – how exactly you plan to make a profit.
Any property investment should be factored in as part of a broader wealth strategy, designed in consultation with your financial adviser.
Get advice now
Investing in property in Australia is a tried and true method of sustainable wealth-building.
It is accessible for individuals of all ages and particularly suited to those earning higher incomes.
But flying blind and entering the market unprepared can be a recipe for disaster.
Calder Finance are specialists in the mortgage broking business.
We deal with hundreds of banks and non-bank lenders every day.
Our numerous contacts within the industry allow us to offer our clients the most attractive investment loans, tailored specifically to their individual needs.
At Calder Wealth Management, our wealth experts can make sure your investment strategies are sustainable and help not just create but preserve them for the long term.
We pride ourselves on leading our clients into the future with structure, financial stability and confidence.
Contact us today to discuss all of your financial needs and mortgage requirements.
The information contained on this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
Taxation, legal and other matters referred to on this website are of a general nature only and are based on Calder Wealth Management’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.
Calder specialises in wealth management with a focus on advice, investment, sustainability, insurance and finance.
Written by David Titley from Calder Finance Broking, for more information please visit the Calder Finance website. Please note that Calder Finance Broking Pty Ltd is a Corporate Credit Representative of BLSSA Pty Ltd ABN 69 117 651 760 ACL 391237.