Finding The Right Investment Property
Research your chosen suburb by checking all advertised listings in newspapers, the internet and real estate agents. Make sure that you know the price of recently sold comparable properties. It is important to choose an investment property with your head, not with your heart. Remember, you won't be living there so try to pick a property with features that appeal to the rental market, ie close to public transport, schools etc.
Sometimes investing in property in another state is a better financial option. Keep informed by reading reports on national property updates and best performing suburbs. Usually capital cities outperform regional areas, however some coastal options have also seen very good growth.
Property Investment Strategy & Options
Property is a popular investment among Australians. Real estate is something we know and understand, and property is a tangible asset we can see and touch.
Property investment – very compelling
As a landlord, your property investment will generate regular rent. This is extra cash to live on, and the rent can help meet the costs of the investment. Importantly, a well chosen property has the potential to rise in value, giving you capital growth over time.
An investment property can also provide potential tax savings. Many of the costs of owning a rental property can be tax deductible, making your investment more affordable.
There are two main types of property investment to choose from.
Residential property; including houses, units or townhouses.
Commercial property; chiefly made up of offices, shops and warehouses used for business purposes.
Residential properties tend to experience lower vacancies and higher demand. A commercial property can offer longer leases, and the tenant usually pays maintenance costs. However most investors prefer residential property because it’s something we’re usually more familiar with.
Your property investment strategy
The type of property investment best suited to your needs will depend on your goals. Some landlords want to make money on the rising value of the investment property through capital growth. This may mean buying in an area where property values are likely to rise due to population increases, or growing lifestyle features like cafes and shops. Values can also increase in older suburbs where property renovation activity is strong.
Other landlords focus on the rental yield of their investment. This is the rental return your property investment earns compared to its market value.
Generally speaking, capital growth tends to be stronger for investment properties located in and around capital cities. Rental returns on property are often higher in outer suburbs or regional areas where capital growth can be lower.
It’s also worth thinking about the type of investment property you’d prefer. Units and apartments often require less maintenance than a freestanding house, and they can be more affordable. Houses will benefit from growth in the value of the land they’re built on.
A newly built investment property can offer greater depreciation benefits than an older property. However, there may be good opportunities to improve the value of an older property through renovations.
Flexible property investment options
An investment property can be held in your own name, owned jointly with a friend or partner, or held in a trust or company. You can also hold your investment property in a self-managed super fund. Either way, it’s important to get the ownership structure right at the time of purchasing the investment property as it can be costly to alter the title deeds for the property later on.
A key decision is whether you want to be a hands-on landlord and manage the investment property yourself. You can choose the convenience of using a professional property manager, but this will mean paying property management fees.
TO BECOME A CONFIDENT AND SUCCESSFUL PROPERTY INVESTOR
YOU NEED A CLEAR INVESTMENT STRATEGY
Know your Investment Objectives
Determine Your Risk Profile
Determine Your Borrowing Capacity
What Type of Property is Most Suitable for Me
Choose an Investment Strategy
Research Locations that Fit Your Strategy
Validate Your Chosen Locations
What is Your Investment Property Exit Plan
Investment Property Cash Flow Analysis
When purchasing an investment property you must keep proper and accurate records for your accountants so that they can maximise your tax benefits when you prepare your tax return.
It must be noted however that all properties are unique and must be calculated on an individual basis.