So, you’re thinking that bricks and mortar might be an ideal investment for you? For many people it is, but getting property investment right takes a bit of knowledge and a bit of time.
Check out our five tips to help ease you into first-time property investment. And when you’re ready to take the plunge, give the RESIMAC team a call, and talk to us about how we can finance the purchase.
Owning a property for investment purposes (a rental property) has taxation implications and obligations. By talking to an accountant who specialises in rental properties, you can make sure you have your ownership and financing structures set up appropriately, to ensure you are not overpaying – or underpaying – your tax obligations.
As your rental property will be generating an income (even if it may not be “cashflow positive” initially), there are taxable deductions for costs associated with generating that income.
While obviously the idea is to make a profit, you could decide to hold on to the property and gain your profit primarily from capital gains; or you may purchase a property that you then renovate and on-sell.
Once you have decided which strategy you want to follow, make sure you talk to RESIMAC Direct about the loan structure that is appropriate for your strategy; having the wrong loan structure can cost you time and money in the long run.
If your strategy is to buy and renovate, buying a well-maintained house in an already pricey area will not generate the capital growth you want from your investment property.
Conversely, if your strategy is to hold the property, then you may need to look at a property that has a low rental yield, to get the capital gains. This will all come down to your budget, and whether you can afford to put in extra payments should the rent you receive not cover your mortgage repayments.
Even if the rent you are receiving is sufficient to meet the mortgage repayments, is it enough to cover all the other costs associated with the property?
While most people (and your accountant will help with this) will factor in costs such as insurance, rates and property management fees, you also need to factor in other maintenance costs. For example, will the property you are buying need to be repainted within the next couple of years? Or does the property have large hedges that will need to be maintained?
It is a good idea to have a cash buffer to cover unforeseen costs, or periods of inoccupancy. Even though we do have a tight rental market, if your tenant decides to move on, it is likely there will still be a period of time between your tenant leaving and the next tenant moving in – so you will need to cover your regular outgoings for that period.
In addition to the above tips, having the right loan structure is essential for property investment. With a range of interest rate and repayment options, talking to an expert will help you ensure you have a structure that works with your property investment, and not against it.
And on that note, if you’d like to talk through your investment loan options we welcome you to give the RESIMAC Direct team a call.
Please note: The information in this article is of a general nature only, and is not intended to be personalised financial advice. We recommend you talk to a financial adviser before making any financial decisions. Investing in property has risks as well as benefits, and the value of your property and returns, are subject to market fluctuations.
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