Perth records highest rental growth rate

This growth rate in rents for Perth apartments, for example, was more than twice the growth rate recorded by Sydney (4.3 per cent) and three times the growth rate of Melbourne (2.8 per cent) over the past year.

Apartments are traditionally favoured by investors as an asset class because they are low maintenance and the rising demand for apartments during 2013 in Perth has seen the ‘sell out’ of new apartment developments shortly after being launched.

Competitive property prices combined with rising rents are driving up rental yields in Perth. In addition, there is a shortage of homes both for rent due to an under supply of new properties to meet the demand generated by our growing population.

Very low interest rates has also encouraged a growing number of  new first time investors will enter the Perth property market to take advantage of these surging rental returns as well as the prospect of rising capital growth rates.

However, first time investors need to undertake careful research before making a decision to purchase because your first investment property can be the key to building a successful property portfolio.

There are important tax advantages as all the costs including all the interest is tax deductible.  Our biggest expense is income tax our second biggest expense is indirect taxes.

There is a simple choice – we can pay 46 ½% income tax or pay 5% interest.  The interest is tax deductible (if borrowed for investment purposes) while income tax never will be. Investors can benefit from Capital Growth – because of demand Perth is expected to go through the roof.  Investors should also consider that there are huge advantages in having multiple properties.

TIPS FOR BUYING AN APARTMENT FOR INVESTMENT PURPOSES

The following tips are for anyone considering buying an apartment for investment purposes:

* Check the exact internal floor space of the apartment. The price of the apartment should be measured in the cost per square metre and this will give you a good comparison compared to similar apartments in the same area.

* Before purchasing an apartment, check the average weekly rent for a similar apartment in the same location. This will give you an indication of future rental returns.

* Check the quarterly strata fees and if there are any plans to upgrade the complex.

* Check how many apartments in the complex are owner occupiers. Owner occupiers tend to take a much more active interest in the upkeep of the complex. If more than 50% of the apartments are owned by owner occupiers then the complex should be well maintained.

* The views that the apartment can offer is important. If you are buying an apartment with good views, check that nothing in the future will interfere with these views i.e. the construction of a new building in front of your apartment.

* Parking is also very important when buying an apartment. Check that your apartment has a dedicated car bay and the ownership structure of car bays in the complex.

* One bedroom apartments as opposed to two and three bedroom apartments are very popular because more people are tending to live alone.

* Obtain finance approval before making an offer on an apartment as this will increase your negotiation position.

* Remember that if you are buying an older apartment for renovation purposes, you may have to obtain approval from the other owners for certain improvements i.e. the installation of air conditioning.