The different ways to build wealth owning real estate in the Adelaide Hills.
Home ownership is the pillar of financial freedom. It’s long been the route families take to create wealth, throughout the course of a lifetime. The house is a symbol of success and security. It’s a tangible asset that’s also home for the people who live there. It’s an investment type wrapped in emotion.
As with all decisions in real estate (and in life), the way you invest in real estate depends on your goals and individual circumstances – what your financial resources are, how much time you have, and what’s most important to you.
In 2021, Adelaide real estate (including the Adelaide Hills region) grew at its fastest rate in 13 years. Mount Barker real estate recorded capital gains of nearly 14.5%. Historically, however, local house prices increase on average of 7% per year. Adelaide Hills real estate offers many types of investment opportunities.
Buy and hold for 10-30 years
This is the most common option. The longer you own a property, the greater the appreciation. If we look the estimated capital growth for a $450,000 property over 10 years (based on a 7% increase per annum), it’ll be worth approximately $885,000.
That same Adelaide Hills property in 20 years would be valued at nearly $1,750,000. For 30 years, it would be close to $3,500,000. The longer you hold, the greater the profit. Plan to stay in a house for at least five years to capitalise on compound growth.
Buy land and build
In the Adelaide Hills, purchasing a block of land and building on it is an attractive investment choice. The Government currently offers a $15,000 grant for first-home owners building a new property and use it as their principal place of residence. Land is a smart investment choice, as there’s a finite amount. Land always appreciates.
An investment property
With the demand for Adelaide Hills rentals, there’s never been a more lucrative time for investors. Generating positive cashflow through renting a property is possible, especially when supply is limited. The average rent for a three-bedroom house in Mount Barker is $400 per week. That same house might have sold for $430,000. If the interest rate was 2.5%, the monthly mortgage repayment is approximately $1,940. The rent would cover the majority of this payment.
There are also certain tax benefits of owning a rental property. You may be eligible to claim the interest on mortgage repayments and maintenance costs.
AirBnb
This is an interesting option that’s gained momentum for homeowners in the past five years. The tree-change relocation and farm-country stay trends have created the perfect opportunity for people in the Adelaide Hills to attract guests.
Let’s use the $400,000 house, for example, with a $1940 monthly repayment. A two-person stay in Bridgewater in a private granny flat style retreat lists for $169 per night. If this is booked out for even half of the month (12 days), the income the AirBnb generates would surpass the mortgage repayment.
AirBnb works well when there’s a separate guest area from the main property, which can be promoted as a tiny house. As a homeowner, you get the comfort of being on the property, without interfering with your guest’s stay. Given the abundance of space in the Adelaide Hills, it’s ideal for creating unique AirBnb experiences. Done right, the Adelaide Hills rental can cover your mortgage repayment and turn into another income stream.
Your family of real estate agents in the Adelaide Hills
All of these wealth-generating options have their advantages and limitations. It comes back to whichever is best for you. At Nitschke, we’re here alongside you for a lifetime. From renting to buying, selling to investing, we guide your real estate journey, so you love where you live and are on the path to financial freedom.
If you’d like to sit down with us and chat about your real estate Adelaide Hills strategy, contact us on 8391 5004.
