Since the hidden risk of Australian real estate investment is investment, there is a certain degree of risk. So I want to share the hidden risk of buying a house in Australia today.
Bank loan ratio (LVR-Loan to Value Ratio) risk)
In order to leverage the principle of leverage, the vast majority of Australian home buyers are lending to banks. The average bank can lend 80%, and some properties and professions (such as doctors, lawyers, etc.) can borrow 90%. But as the housing market and supply and demand change, banks may sometimes lower their LVR. Some houses, such as serviced apartments and student apartments, have a slightly lower loan ratio, with banks sometimes lending only 70% or even 60%. As long as there is spare money, as long as the house is good, in case the bank downgrade lLVR is not necessarily a bad thing. If you borrow less, you can pay less in the future, because after all, you will have to pay back all the bank loans in the future.
Valuation risk
Sometimes in different Australian cities, depending on the bank's view of the housing market and the location and quality of the property, according to the appraiser's attitude towards the housing market (optimistic or pessimistic), sometimes the valuation is lower than the contract price of the purchase. If investors don't have other houses to use as collateral, they will have to put more money into them if they don't have to do so in cash, if they have a slightly lower valuation. As long as the house, the quality is good, the purchase price is reasonable, even if the bank's valuation is slightly lower, also do not panic, let alone worry. If the valuation of commercial property is based on a fixed formula for the return of rent, the valuation of residential property basically reflects the individual opinion of the valuer and does not represent the market price. It is not necessarily a bad thing to borrow less as long as you have money to deal with.
Australia's five capital cities have different real estate cycles. In rising cities, such as Sydney, banks are likely to be valued at the same or even higher prices. In cities where prices are low or falling, the valuation is sometimes the same or slightly lower than the buying price. In fact, in some parts of Sydney, due to the housing market overheating, prices have begun to be too high some low valuations.
How to control this risk? First of all, do not panic, and do not complain. There is room for cash in hand at the time of the investment. As long as the location is good, the real estate is good, and the long-term appreciation potential of the building is very large.
The risk of empty rent
The vacancy rate for residential property in Australia is generally around 3%. As long as the location is good, the house can be rented out very quickly. Sometimes when a new development is delivered, it takes several weeks to rent out a house that is on the market at the same time. After they are fully occupied, there will be only one or two units on the market at any time, and it will be easy to rent again. A tenant has to give at least three weeks' notice before he or she moves away. The maximum guarantee of long-term rental and high rent is the location and design, quality of the house itself.
Risk of individual cash flows
Since Australian real estate investment is a long-term investment, people's circumstances may change over a longer period of time, business is good and bad, and the working class sometimes loses their jobs temporarily. But don't stop investing because of it. In Australia, as long as you are willing to work, even if you lose your job temporarily, it is not difficult to find another job. It is easier to find a job when there is a need for a person to have a reason (such as raising an investment house).
The risk of confidence
This is probably the biggest of several risks. This risk is not well controlled, investors may give up the past. This risk is largely influenced by the first four risks. When house prices do not rise, when loans, valuations, and rentals face a little challenge, if the investor has unclear goals, lack of psychological readiness, and more negative people around him, he may lose confidence in the investment and choose to give up. The best way to overcome this risk is to define the investment objectives, to firmly believe in financial freedom through real estate investment, to improve their psychological quality, and to listen only to the advice of those with successful experience and investment results.
