Choosing a Home Loan

How to join the million dollar property club

The idea of owning a million dollar home is often considered a pie-in-the-sky dream, impossible for the average Australian. However, the winds of change may be blowing, as CoreLogic RP Data reports a 31 per cent increase in the number of suburbs with a median value of $1,000,000. With so much real estate seeing sky-high capital gains, you might be wondering how you could work your way into the million dollar property club.

It'll take some work and some time, but it's perfectly possible to work your way into these elite suburbs – with the right strategy.

Your first piece of real estate is the initial step to the million dollar property club.Your first piece of real estate is the initial step to the million dollar property club.

Get onto the market (in the right spot) 

If you're young, you already have an advantage over the market: time. The passage of time and the accruing of capital gains is what turns these suburbs into million dollar gold mines. It's a fact of life that young people tend to not have as much capital as older investors, but that doesn't mean you should shy away from making a purchase. It just means you have to be careful about what kind of suburb you buy into.

By purchasing your first home and getting your foot on the first rung of the property ladder, you're making the rest of the climb to $1,000,000 that much easier. As your property accrues value and you pay off your mortgage, you'll be seeing equity growing in your home from both ends. This equity can then be used to buy your next upgrade, and so on and so forth.

But where to start? The property you buy into needs to be both affordable, as well as having room for growth. Using CoreLogic data, Realestate.com.au reported a 13.2 per cent year on year median value increase for units in the suburb of Penrith, Sydney.

They also sold for $295,000, making them affordable for purchasers looking to start on their property journey. Why the growth? LJ Hooker Penrith Director of Sales Steve Thomas told Realestate.com.au that it was at least partly due to infrastructure upgrades and a new nearby airport.

So the opportunities are there if you know where to look for them. If you want to join the million dollar club, don't waste your time renting. Figure out your borrowing power, get a deposit together and start your climb while you still have the time to see growth.

Diversify

Find a growing suburb, buy low and wait.

Once you have found a property that you are happy with living in yourself, it's time to start looking into starting the journey again with other properties. The same rules apply: find a growing suburb, buy low and wait. However, at this point, you also have the opportunity to rent out that second, third, fourth property, putting the buildings to work instead of just waiting for capital gains to accrue.

At this point, you'll also likely start feeling a lot more financially secure, and might be able to take on more risk in your investments. Asset ownership was named by Members Equity Bank as one of the main predictors of strong financial comfort in a recent survey, and this extra security means you are in a far better position to refinance or take out more loans to diversify your property portfolio even further. However, you should consider things like landlord insurance now, as the quality of your rental properties will directly affect your wealth generation.

Renovations can be big or small - they nearly all add value.Renovations can be big or small – they nearly all add value.

Renovate

Even small changes can make your property more attractive to buyers or tenants.

So you've been nodding your head throughout this article and saying "yes, I already have my own home and yes, I own at least one secondary wealth-generating property, what else can I do?". You've got a solid base, but the journey doesn't stop there. By renovating your current properties along popular trends, you can add real value to your assets.

Even small changes can make your property more attractive to buyers or tenants. For example, the Optus Renter of the Future Report found that the modern tenant is mostly concerned with parking (38 per cent), cable internet (31 per cent) and the number of power points in a room (22 per cent) – all things that you as a landlord can add to improve your tenancy rate and perhaps improve your rental yields. There are plenty of other options as well, from installing solar panels to attract the environmentally-aware to major projects like open-plan design to create more space.

These renovations will improve the properties you've already got, rather than diversifying too far and making property management too cumbersome.

The end of the line

By this point, you should have enough capital to put together the deposit to buy into one of these elite suburbs, either by selling one (or several) of your properties or by refinancing and unlocking some equity for a deposit. It's been a long journey, but you've made it. Welcome to the million dollar club.

For more information on how you can push towards your property goals, get into contact with the mortgage brokers at Premium Mortgage Group and let us help you find the right home loan.

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