An investment property is real estate usually purchased with the intention to grow wealth and generate a passive income. There are various advantages to investing in real estate, but it is critical to have a plan and make objective judgments based on what will provide the highest returns for your circumstances. The tips in this article is general in nature and does not constitute financial advice, please seek financial advice from a professional to understand implications that apply to your personal circumstances.
I’m a beginner to property investment
Are you thinking about investing in real estate but aren't sure where to start? A real estate investment is relatively simple to understand compared to other types of investments. Furthermore, it is tangible in that you can see, touch, and even live in it. As long as there is demand for property, you can expect substantial growth from your investment. However, this is not to imply that property investing is an easy venture; you need a real estate agency who can help guide you on your property investment journey. Here are our top tips to navigate your way to buying your first or even second investment property:
Get your budget right
Your budget will help determine many factors that will help you in your search for a property including the type of property and the location. Have you created a budget that is within your means? Have you considered the upfront and ongoing costs? It is crucial that you have positive cash flow or a cash buffer to cover additional costs that may arise whether it’s change in property prices or any tenant losses. It would be handy to create a cash flow plan and estimate your monthly rental revenue and costs, including strata maintenance, and loan repayments.
Understand the legal and tax implications
Whether it is doing your own research or getting help from professionals, it is important that you are across the general legal and tax implications that come with an investment property. For example, if your property is negatively geared; meaning that your interest and other expenditures exceed the revenue generated by your investment property, the loss might lower the amount of tax you pay on your earnings during tax time. On the other hand, if your property is positively geared; meaning the rent you're collecting exceeds the cost of ownership, you'll have to pay tax on the net income the property creates. Keep all applicable documents from the start so you can claim everything you're entitled to, and make sure you disclose any rental-related income in your tax return each year.
Remember that the following are all 100% Tax-deductible on your investment property: Real estate Agency Fees, Strata Fees, Council Rates, Water Rates, Tradie/Service Callouts, Maintenance, Renovations and of course, the Interest on your Home Loan. The other 100% Tax-deductible items on your investment property that are often less remembered or discussed are: White Goods, Hifi Systems, Mirrors, Decorations, Plants and most importantly, the Depreciation of all the Building Materials in your home. Knowing about everything Tax-deductible and creating a Depreciation Schedule will help you stay ahead financially and will help you come out on top with higher profits. With the latest Government announcements and lower unemployment rate, Sydney has some excellent investment property opportunities ahead.
Get assistance from professionals
Property owners often make the mistake of failing to hire a property manager and discovering that they cannot manage the property properly themselves. From finding great tenants to managing the property, there are a lot of responsibilities that can be offloaded to professionals. In addition to being familiar with the local market, property managers also have access to a network of tradespeople and contractors. So when you need a plumber on a Sunday morning to fix that faulty pipe, they'll know where to find one. Use a real estate agent who can help you every step of the way.
I’m looking to expand my portfolio
Are you looking to buy your dream home and use your current one as an investment property? Are you looking for a home that better suits your lifestyle? Are you looking to expand your investment portfolio? Your options may be weighing as you consider all these questions. To help you, we have identified 3 top tips to expand your portfolio with ease:
Determine if your house has rental appeal
You may adore your home, but would others agree? The features of your home and whether they attract prospective tenants determine whether or not your home has rental appeal. Is your property near public transportation, shopping, and other amenities? Are there any possible issues or concerns that may deter renters? Does it require any repairs or improvements to make it rentable? Put yourself in the tenants shoes and consider what would make them walk in and say, ‘yeah I could see myself living here’.
Pick the right type property
While your budget will largely determine your selection of potential investment properties, it is important to consider your unique goals to help you pick the right one. Buying an existing older property with a renovation or development opportunities and then updating it with modern amenities will likely pay off more when you sell it. Properties that have character or are from an old period often make excellent long-term investments, because of their scarcity and wide appeal. On the flip side you can consider a new home as an investment property because it generally means there is less maintenance and it is more energy efficient to cater for modern society’s green movement.
Get support from the right people
In Australia, the vast majority of property investors own only one or two properties. This is primarily because they don't know how to manage their portfolios, which prevents them from expanding to have more investment properties. That’s why getting help from a good team of professionals earlier will prevent the headaches later. It is also crucial to understand the competency of the support team and the extent to which they will be involved. They take care of buyer inquiries, handle day-to-day tasks, and free up the lead agent to do what they do best - maximise your property's value.
Any property investment comes with a certain level of risk. In order to reduce the risk, it's important to take the time to do as much research as possible and work with a real estate agency who has dedicated property experts with experience and a passion for investment properties.