5 tips to Investing in Property

Spring is traditionally a boom time for the property market. If you are looking to buy an investment property then read our top tips. Buying property can be a great way to build your wealth, however just like any other investment, you need to do your research.

First and foremost, know WHY you are buying an investment property – so many people buy just because everyone else is! Yet everyone has different goals, the reason YOU buy property should be important to you (#getaplan). For some it is to have as a long term investment, others want to renovate and improve the property and some will want to sell and attempt to make a quick profit (known as flippers). If it is the latter, you really need to crunch your numbers as it’s hard to make a quick profit when you add up the significant purchase costs (stamp duty, legal costs, sale costs, agents fees and capital gains tax).
How much can I afford to spend? – a big question if you live in Sydney or anywhere on the eastern seaboard. Again this will be different for everyone and will depend on a few things such as how much have you got to contribute towards the purchase? Do you have equity in your current home? How will the purchase effect your cash flow? Don’t forget to factor in interest rate rises when looking at your cashflow.
What are the tax implications of owning an investment property? The general rules that are associated with property investments are that the rental income is taxable to the owner, mortgage interest repayments are tax deductible as are expenses associated with managing and maintaining the property. You may receive some “depreciation” for fixtures and fittings and the write from building costs. These will be larger for newer buildings. You should seek tax advice to optimise your personal situation.
Consider both capital growth and rental yield – it’s a balancing act but ultimately you want your property to achieve strong capital growth and a good rental income. A property might produce good rental yield but may be priced at the top of the market so you miss out on growth opportunities. Conversely you might be forced to take a lower rental income in the hope the property will increase in value over time. Ideally you get the balance right.
Information is king! Research all you can about the area, is there planned infrastructure, schools, hospitals, public transport? What is the demographic – does it have a good mix of owner occupiers to investors, as you want to invest in an area where your neighbours will take pride in maintaining their properties so the area will appeal to tenants and improves your chances at resale. If you do not have time for research, you should not invest. However, you can outsource this and we are connected with some fantastic property experts who can help you select the right property for your needs.

Want to chat property investing? Contact us here.

This information contained in this document has been provided as general advice only. The contents of this document have been prepared without taking account of your personal objectives, financial situation or needs. You should, before making any decision regarding any information, strategies or products mentioned in this document, consult with your GPS Wealth Ltd financial adviser to consider whether it is appropriate having regard to your own objectives, financial situation and needs.