Australians are becoming wealthier – and it’s thanks to property
Wealth per capita is now sitting at a record high of $522,032, thanks to record-high property prices. ...
So, you hired a buyer's agent and a property manager and bought an investment property in Perth. If you are like many new investors, you are probably thinking, “What do I do now?”
The short answer: treat your real estate investment like a business because plenty of other investors are. Whether you treat real estate investing like a business or a hobby, your results will be commensurate with your effort. We aren't suggesting that you have to treat it like a full time job, but we are saying that you must treat it like a business.
So, what do we mean by “treat it like a business?” What do you, the real estate investor or business owner, need to do to make sure that your investment properties inare protected and that you are getting the best possible returns on your investments?
Here are 5 things that you can do in a few hours of focused work per week to treat your investments like a business, maximise your returns and minimise your risk.
Get annual rental and sale appraisals. This will help you keep track of how much your investment property is worth, especially in a market like Perth. It will also ensure that you are charging your tenants a rent that reflects market value.
Research Property Price Trends
Conduct research as to where property prices are most likely to go in the next year. You can use a price prediction tool or talk to local agents. You should also examine metrics such as selling prices, the time properties are on the market, and the number of properties for sale in your immediate market.
Hire a Great Property Manager
There are plenty of property managers in Perth, but they don't all provide the same service. Your property manager must be diligent and proactive; he or she is your first line of defence for protecting your investment. Your property manager makes sure rents are paid, makes sure your property is kept in the best possible state of repair, ensures that your vacancy times are minimal and that there is no shortage of qualified tenants interested in your property.
Review of Financing
You should review your loans at least once a year by speaking to your finance broker. If your lender is not giving you the best interest rate possible, it is time to consider refinancing. Your finance broker will be able to advise you on whether you will profit from finding another lender.
You should also review your tax planning and deductions with your accountant at least twice a year. We recommend doing this at the beginning of the financial year and halfway through. This allows you to put a plan together and adjust it along the way as your situation changes.
Your worst case scenario would be to get to the end of your fiscal year and find out that you missed out on opportunities to minimise your tax payable. This is a mistake that is easily avoidable.
Why this is so important
If you don't treat investing like a business, you could get lucky and maximise your investment by accident, but it isn't likely. Especially if you plan to have multiple properties, due to the magic of compounding, you could either make thousands of extra dollars or leave the same amount on the table.
Consider two scenarios: in the first one, a small investor buys one or two properties and does nothing. He hires a property manager, which is a good move, but he doesn't do anything else to protect or maximise his investment. Maybe by the time he is ready to retire and sells the property, he has a nice little nest egg that can help him live a fairly comfortable retirement lifestyle, or maybe his investment didn't turn out well and doesn't really provide him with much.
Now consider the investor who treats it like a business. He is on top of his investment from the start. He does his due diligence and maximises every factor that determines the profit from his investment. He does such a great job that he always has money to reinvest.
By the time he retires, he has as many as ten houses that he may or may not sell. The houses are in great shape and all provide positive cash flow due to his constant monitoring of the real estate market and interest rates. He has more houses because he used equity to reinvest in more properties.
About Jarrad Mahon
Jarrad is the director of Investors Edge Real Estate.
Jarrad thrives on helping hundreds of investors every year formulate a clear plan to get the best returns from their Perth property. This requires a carefully thought out and innovative approach to understand your situation and help you to make the right move at the right time.
His renowned personalised "Property Success Plan" takes you step by step through how to make thousands of extra dollars and avoid the costly mistakes that Jarrad has learnt the hard way by investing himself all around Australia.
Over the last five years he has used his engineering background to build and refine a unique property management, sales & investing process that is sure to impress while getting you real results.
A sales and marketing expert, Jarrad combines the latest technology and cutting edge sales strategies to sell homes across the whole of Perth metro area.