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A Few Important Tips Don't give the tax man any more money that you have too! Getting a depreciation schedule made by a qualified quantity surveyor can be one of the most important things you can do to turn an under performing property into quite a performer. Below are a few sample pages from one of my depreciation schedules.
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Don't wait for the tax man to give you your refund The Australian Government lets you reduce the amount of tax you pay during the year by filling out a Income Tax Withholding Variation (ITWV) form. They will then work out what your tax deductions will be for the end of the financial year based on the information you provide and instead of paying your usual amount of tax, they inform your employer to take out less tax during the year. This is putting extra money in your pocket each week/month, that you can use towards a deposit for another home or if you have a mortgage on your on home, it helps you pay it off sooner.
Make a Business Decision Remember that buying an investment property is a business decision. It does not matter if you personally like the property or not. The key is to make a good business decision and buy a property that will make you money. |
Where and What to Buy
Where to buy
To answer this you need to work out what you want out of your
investment property. If you want good capital growth you need to be
close to a city or a beach / lake. Capital growth is usually at its highest
in these areas and gets lower as you move away. If it is property that
will generate positive cash flow you are after then you will be looking much
further from a city or water. Places in rural areas or small towns are
best for positive cash flow as you can buy them much cheaper and still get
good rent. The trade off is that capital growth is much slower and
rental demand may not be as high. Most people will buy somewhere in
between trying to get the best of both worlds.
Once you have worked out an area start thinking about more
local issues. Things that can work in your advantage to have close to your
property:
Public transport (bus, train, tram)
Schools (many renters have kids that will need to go to
school)
Shops (at worst somewhere close to buy bread and milk)
Another thing I will mention is that you can sometimes find a
property on a main road for a good deal. This is because most people do not
wish to live on a main road so they have to lower the price to get someone
to buy. If you buy it you to will need to have a lower then normal price to
sell it latter on. As I mentioned before, people do not want to live
on main roads. This includes renters so you will need to offer a reduced
rent to get people into your property and they are will probably not stay
for very long.
What to buy
I would recommend to the novice that you stay with
residential property to begin with and not start out in commercial or
industrial. Those can be very rewarding but vacancy rates can be much higher
so if you will be relying on rent to help pay the mortgage then residential
is the safest bet.
House's are my recommendation for people to purchase as
capital growth can be better for houses and there is no other owners to deal
with that you can get with units or town-houses. Make sure you get a
property inspection before you buy or make your contract subject to a
property inspection. Major things to watch for are pests (white ants) and
cracks in the walls or paths to suggest that the ground is moving.
Units / Townhouses can be ideal for the new investor as
prices are a bit cheaper than houses but the draw backs can be:
Lower rent
Other owners to deal with in the complex
Extra expenses for body corporate
A majority decision could enforce a rule that you don't agree
with
One more thing to note, if your complex has a lift the bills
for repairs and maintenance can be very large and swimming pools also need a
lot of effort to keep them clean and healthy.
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Don't wait to long I would be a much wealthier person today if I had not procrastinated so long on what and where to buy. Imagine this... over 5 years you buy 5 houses, each worth about $200,000. Now also assume that you have used none of your own money for the purchase, except a small amount on each as a deposit. Now we all know that property inflation has been sitting between 5% and 25%. For this example we will assume the worst and use a 5% increase on our 5 houses worth above $200,000 each. This is $50,000 a year in equity being built up each year to put towards your retirement
See the Importance of a Positive Cash Flow The link below provides all the details on the importance of finding Positive Cash Flow properties. Don't buy an investment property until you have read this page. Also provides a few working examples so you may see the affects before your own eyes. Negative Gearing... Friend or Foe?
Buy Like a Professional With this software you no longer have to worry about making a wrong decision. Imagine having the combined confidence of a Land Agent, a Accountant and a Property Tycoon all rolled into one.
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