Dabbling in the property market can be exciting and financially rewarding for savvy first time investors.
Property investing is currently red-hot in Australia. A new Galaxy survey of 1005 people nationwide, conducted on behalf of State Custodians Home Loans, found that the majority of all Aussies (65 per cent) want to purchase their own investment property.
More than one third (34 per cent) want an investment property because they see it as the best investment to build wealth as the property increases in value.
State Custodians’ general manager Joanna Pretty says the key to success with any investment strategy is knowledge.
“Start researching the property market movements so you can begin to identify areas that might provide great investment returns,” she suggests.
“Talk to a buyer’s agent or other real estate experts about areas you’re interested in, and visit an accountant or financial planner to help you workout whether investing in property is best for your situation.”
Follow these other essential tips and you’ll soon be on your way to becoming a successful landlord.
1. Invest in the right property and area
Selecting the right property in the right area is paramount to your success. Scour property websites, read articles, quiz agents and other property expert. Research whether it’s better to buy a unit or a house and go for an area that has had good growth. Look up properties on sites which will show you the dwelling’s price history.
2. Treat the property like a business
It’s always a good idea to have an idea as to why you’re investing in the first place. “It seemed like a good idea at the time” and “I’m doing it because everyone else is” aren’t exactly great reasons to fork out for an investment property. Ask yourself why you are buying the property to create a strategy. Do you want to sell it in 10 years’ time to help pay for private school fees? Will you hang onto it until retirement to create extra wealth? Or are you planning to pass it onto your kids? Having a clear goal will keep you on track, especially if the value takes a tumble. If you plan to hold the investment long-term it may not matter so much, as the market might correct itself.
3. Maintain the property
Once you secure a place, getting your own hands grubby can really pay off. Painting a dwelling yourself or tidying up the front yard will save you money and can make a big difference. Not only will you make the property more appealing to renters and therefore attract a higher rent, but you’ll also add more value to the property.
Updates can include: painting, sanding/carpeting floors, fixing plumbing issues, landscaping, installing a new oven/dishwasher and mending light fixtures. Be prepared to spend up to a few thousand dollars if the property is tired.
4. Keep things professional with the tenant
While it is important to be on good terms with your tenant, don’t get too friendly with them! Be wary if your tenant is regularly texting you to gossip about the neighbours and considers you a more of a friend than a landlord. Rent may arrive late or the property may not be maintained as they think you’re “cool” and won’t mind. It’s often a better idea to employ a property manager so you won’t have to be in contact with a tenant at all.
5. Get a depreciation schedule
There are a number of items in an investment property that can be depreciated at a certain rate, which you can claim as a tax deduction against your taxable income. The value of these items needs to be established upfront. Engage your accountant at the time of purchase to advise you on getting the depreciable items valued properly. Setting up a depreciation schedule from the start will ensure you get maximum deductions.
6. Create an expert team
Having the right people around you who can help you make the right decisions is a great asset. Here are the four experts every first time landlord needs:
Accountant: An accountant can provide advice on the tax implications of the property. Whether it’s positively or negatively geared could mean the difference between getting more tax back or paying tax. You also need to understand how your investment property will impact your financial situation.
Financial planner: If investing all seems a bit mysterious to you, a financial adviser can help you work out your goals plus your attitude to risk. They can advise you on the type of property you should be looking for to suit your objectives.
Solicitor: Not only can a solicitor read through and help fill out important documents to ensure the agreements are legally binding; they can also represent you if something goes wrong.
Lender: Finding the right home loan can make all the difference when it comes to making a profit. The right lender can crunch the numbers for you up front, show you what type of property you can afford and how much you need to contribute towards your purchase. There are various home loan options available with a range of money saving features that can specifically help investors save money throughout the loan term.
Story by Fleur Michell
