9 things to consider before investing in property
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1 minute read

9 things to consider before investing in property

9 things to consider before investing in property

by St Dane Property Solutions | August 28, 2018 | 1 minute read

Promoted by St Dane Property Solutions.

While investing in property is more achievable than most people realise, there are a few questions you’ll want answered before you take the first step.

Residential property investment is a wealth creation strategy that works on several levels. An investment property can help you to minimise the tax you pay, provide you with additional income and, once you have equity in one investment property, you can leverage off that to purchase another.

  1. How does property compare with other investments?

Residential property has strong historical growth rates. It is one of the very few investments virtually guaranteed to create income. With property, you have a level of control over your investment, but there is nothing you can do to influence the stock market.

Property is a low-risk investment. Almost 70 per cent of the market is made up of homeowners, who underpin values, and the remainder of the market is tenants who ensure consistent rental income.

  1. When is the best time to invest?

In the business of wealth creation, timing is all-important and, while property is one of the more stable investment strategies, it is still affected by market cycles.

The timing is excellent now to start, or expand, your investment portfolio. Interest rates are at a record low and look set to stay that way for the immediate future.

Vacancy rates are low and rental returns are high in most capital cities. In Melbourne, for example, the Real Estate Institute of Victoria puts the proportion of vacant properties at 1.9 per cent. This is good news for investors as high demand creates high rental income.

  1. How will it affect my tax return?

Property investment works on several financial levels, including minimising the amount of tax that you are required to pay.

You can claim deductions if your property is rented or available to rent. Management and maintenance costs, including interest on the loan, can generally be claimed against your current-year income. Depreciation and the cost of improvements can be deducted over several years. We’d recommend speaking to a property investment expert who can sit down with you and work through a tax minimisation strategy together.

  1. What is negative gearing and how will it affect me?

Negative gearing refers to the situation where the cost of owning your investment property exceeds the rental income. The difference can be usually offset against your salary, or other income, and the savings are significant.

  1. Should I buy a new or established property?

New properties provide maximum depreciation benefits. The building is more energy efficient and environmentally friendly than an older builder and will have lower maintenance costs. New apartments attract tenants willing to pay a premium price. All of this results in a better and more consistent cash flow, which usually equates to a higher resale value. Best of all, say the experts, are new apartments in inner-city locations close to transport and the attractions of urban life.

  1. What deposit do I need?

Experts suggest investors aim for 20 per cent, but it may be possible to enter the market with as little as 5 per cent. Mortgage insurance is not available for investment properties, so you may feel more confident with a larger investment. Don’t forget, your home equity can be used to invest in property.

  1. Where should I invest?

As populations increase in major cities, residential property is in continual demand, particularly in vibrant inner-city areas with good transport links, a café and restaurant culture and a high level of amenity. In Melbourne, apartments in the inner suburbs perform consistently well, especially when close to frequent and reliable transport, and within easy walking distance of cafes, restaurants, shopping and amenities.

  1. Is there an advantage in debt consolidation?

Debt consolidation may be an easy way to free up cash to put towards your investment. The objective is to combine credit card and other types of debt in the one loan at a lower interest rate. You will save on fees and charges as you pay costs for one loan rather than several. Savings on monthly repayments can be significant.

  1. Should I manage the property myself or hire a property manager?

The property manager is a professional who can look after everything to do with finding and managing tenants, maintenance and repairs, as well as advise you on your rights and responsibilities as a landlord. A good property investment specialist will put you in touch with a reputable property manager as part of the process in helping you invest in the right property.

A free consultation with a St Dane property investment expert can walk you through any of the above questions. They can help you buy the right property, at the right price, at the right time: https://stdaneproperty.com.au

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