Investing in Property
When it comes to property investing, research and having the right people on your side are essential.
Here are some pointers to help you locate the best rental and maximise your profits.
Manage your investment
Taking care of a property takes time and effort.
If you don’t have a lot of time or money to spare, hire a professional property manager to market the rental, screen and choose tenants, collect and pay rent, coordinate repairs and upkeep, issue condition reports, and handle any disputes.
Request recommendations for reputable managers from other area landlords.
You should also conduct your own inspections twice a year.
Any connected expenses, such as travel and lodging, are tax deductible.
If you choose to self-manage, you must be familiar with tenancy regulations and be willing to organise repairs, particularly those that occur after business hours.
We understand that each borrower has their own set of circumstances, some of which are more complicated than others.
We know which lenders will deal with investment customers that have more complicated requirements and will negotiate on your behalf based on our extensive experience.
Unit or house?
House prices rise in larger leaps than unit prices, providing greater potential for financial gain over time.A rental home, on the other hand, comes with additional obligations, such as maintaining gardens and lawns (and, in some cases, a pool).
A condo or townhouse may not appreciate as quickly, but they are often easier to maintain and, depending on location, condition, and size, may even be easier to rent for that reason.
Location
You’ve probably heard this before.However, when it comes to rental properties, location can mean a lot of different things.Consider properties near schools, large commercial centres, and public transportation if you’re searching for optimal convenience.
Spend a significant amount of time investigating potential target locales, including recent property price changes and future estimates, rental vacancy rates, and any projected infrastructural improvements.You should also scout the area as if you were a renter to obtain a sense of the local market
Remove the emotion
Buying with your emotions rather than your brain is one of the worst blunders you can make with any investment.
Keep in mind that your rental house is not your “sweet home.”
A well-presented residence is desirable, but consider practicality rather than opulence.
A neutral interior colour palette, practical and robust flooring and window coverings, a low-maintenance yard, and adequate storage are all desirable.
If you’re buying an older style flat, seek for one with an indoor laundry, a garage or parking space, and few stairs (unless there’s a nice view from higher up, which might add value to the property).
Don’t forget the extras
Aside from loan repayments, an investment property necessitates a consistent financial commitment.
Make sure you have enough funds to cover your land and water charges, as well as any maintenance and repair expenses.
Tenants have a right under their rental agreement to receive repairs or replacements as soon as feasible, therefore you’ll need to be able to pay for them.
Body corporate costs, which can range into the thousands in some sophisticated complexes with professional landscaping and shared amenities like swimming pools, are also included in the price of apartments or units.
Cover your investment
Make certain that you have landlord’s insurance.
This will cover you for tenant-caused damage and unpaid rent if a tenant fails to pay, as well as other common hazards like a home fire or a storm.
If you buy a strata title property, check to see if the body corporate has enough building insurance to cover the cost of reconstructing the complex at current costs.
It can be difficult to determine what you need to cover versus what your body corporate covers.
Anything from the wall paint inward is yours, and everything outside of that is covered by the body corporate, according to a good rule of thumb.
Any interest?
Interest-only loans are popular among property investors since interest payments are tax deductible.
That means you’re betting that the value of the property will rise over time, resulting in a profit in the long run.
For high-income people who want to take advantage of negative gearing, this is a solid option.
If you want to positive gear your investment (i.e. make a profit after expenses), you should consider taking out a principle and interest loan and using the profit to pay down the principal.
Keep in mind that any profit you make from your investment will be taxed.
Discuss your tax situation with your accountant so that your broker can identify the best financing for you.
Appreciate depreciation
For wear and tear on property, the ATO will give you a discount on your tax payment.Depreciation is what it’s called, and it may be a huge help to investors, especially if they acquire a new home.
The method is complicated and is based on the age of your home, construction materials, and different fixtures.
A skilled quantity surveyor can help with this.
They’ll assess the property and fill up a Tax Depreciation Schedule for a charge (usually approximately $600), which your accountant will include in your tax return.
Taking ownership
If both salaries must be factored into the financing equation, contact us for the best guidance on the optimal ownership equation for your situation.
A General list of investing FAQ
Capital expansion is a good thing.The increase in value of property over time is known as capital growth, and the long-term average growth rate for Australian residential property is around 9% per year.Property values go through periods of stagnation as well as fall since property markets operate in cycles.This is why it’s critical to have a 10-year investing horizon.Note that if the value of your investment property increases by 7.5 percent each year, it will double in value in ten years.
Rent is a source of revenue.The rent generated by an investment property is known as rental income, or yield.To calculate this, divide the annual rent by the property’s purchase price and multiply by 100 to get a percentage figure.More expensive properties, on average, produce lower yields than more moderately priced properties.In most cases, capital growth and rental income have a direct, inverse connection.In the long run, properties with a lower rental income will generally provide more capital gain.
Benefits from taxation.Any losses you experience as a result of holding an investment property might be deducted from your taxable income by the federal government.If the amount you receive in rent from tenants is $5,000 less than the cost of financing the mortgage and paying rates, water, and other services associated with the property, you can add $5,000 to the amount of income you don’t have to pay tax on at the end of the year. If you work as an employee and have income tax withheld from your salary, you will receive a refund from the Australian Taxation Office (ATO) once the financial year ends.
Volatility is low.Property values change less than those of the stock market.Many investors claim that as a result of this, they have more peace of mind.
Leverage.Many other investments do not allow for as much leverage as property does.For example, if you have $100,000 in savings, you may put it in a stock portfolio or use it to purchase a $500,000 home with a $400,000 mortgage.If the stock market rises 10% this year, your stock portfolio will be worth $110,000, and you will have made $10,000.If property values rise 10% in the same year, your home will be worth $550,000, and you will have made a $50,000 profit.
To invest, you don’t need a large wage.If you’re buying to invest, lenders will factor in rental income as well as your personal earnings.If you already own a home and have some equity in it, you may be able to use it as a deposit for an investment property, allowing you to purchase one without having to come up with any more funds.If you don’t own a home and believe you’ll never be able to afford one, purchasing an investment property could be a nice stepping stone toward one day owning one.
When it comes to money and borrowing, we’re all different.With our 30-second Home Loan Quote, you can get an estimate of how much you could borrow.Alternatively, contact us immediately and we can assist you with calculations based on your specific circumstances.
Our loan kinds and features tutorials will help you understand the various options available.There are hundreds of various house loans to choose from, so contact us right away.
Usually between 5% and 10% of the property’s value, which you pay when you sign a contract of sale.Please contact us to discuss your deposit alternatives.You might be able to take out a loan against the equity in your current house or a rental property.
For an estimate, use our Repayment Calculator.Because there are so many various loan programmes available, some with lower beginning rates, contact us today to learn about the current offers; we’ll discover the ideal loan setup for you.
Most lenders allow you to choose from a variety of repayment choices to fit your pay cycle.Instead of monthly payments, aim for weekly or fortnightly ones, as you will make more payments in a year, reducing your loan’s cost and length.
When purchasing a home, there are a variety of fees and charges to consider.To assist you avoid any unpleasant shocks, below is a list of common costs:
- Stamp duty — This is the most important one.By comparison, all other expenses are minor.Stamp duty rates differ between states and territories, and they are also affected by the value of the property you are purchasing.It’s also possible that you’ll have to pay stamp duty on the mortgage itself.Visit our Stamp Duty Calculator to get an estimate of your potential stamp duty charge.
- Legal/conveyancing fees — These expenses, which range from $1,000 to $1500, cover all legal formalities related to your property purchase, including title searches.
- Building inspection — Before you buy the house, get it inspected by a trained professional, such as a structural engineer.Your contract of sale should include a clause requiring a building inspection, so that if there are any structural issues, you may back out of the deal without incurring major financial penalties.Depending on the size of the property, a building inspection and report might cost up to $1,000.This inspection is normally arranged by your conveyancer, and you will usually pay for it at settlement as part of their overall charge (in addition to the conveyancing fees).
- Pest inspection — It’s also a good idea to do this before buying a house to make sure it’s clear of issues like white ants.Your contract of sale should include a pest inspection clause, so if any unwelcome crawlies are discovered, you may be able to back out of the deal without incurring substantial financial penalties.Depending on the size of the property, budget up to $500.This inspection may be arranged by your real estate agent or conveyancer, and you will normally pay for it as part of their final charge at closing (in addition to the conveyancing fees).
- Lender costs — Most lenders demand establishment fees in addition to administrative fees to assist pay the costs of their own assessment.
We will inform you of your lender’s fees, but budget between $600 and $800. - Moving costs — Remember to account for the expense of a removalist if you intend to use one.
- Mortgage Insurance costs —If you borrow more than 80% of the property’s purchase price, you’ll have to pay Lender Mortgage Insurance.
You might also think about getting Mortgage Protection Insurance.Regular strata fees must be paid if you purchase a strata title. - Ongoing costs — Along with regular loan repayments, you’ll need to factor in council and water charges.It’s also vital to think about building and contents insurance.To cover the loan, your lender will most likely want a minimum sum insured for the building.
