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Are you thinking about purchasing property for investment purposes? We spent some time working through a financial checklist that might assist you.
a) Set your goals. Are you looking for capital growth over time, or regular and steady rental income? Which is most important to you?
b) Get good advice! Now isn’t the time to skimp on expert advice. Speak with a financial planner; speak with your accountant; and do it before you buy. Do you want a positively geared property (this means the rent you earn is greater than your expenses) or negatively geared (your expenses are greater than the rent and the difference between the two – your loss – is tax deductible). Do you know how depreciation works, and what it can offer to your property investment bottom-line? (We wrote a series on Tax Depreciation in our blog recently – take a moment to check it out)
c) Know your current situation. Run an eye over your assets and liabilities, consider the impact negative news (such as loss of a job) might have on your financial situation and your ability to repay the loan.
d) Have you thought about buying property through your Self-Managed Super Fund? (More on this soon)
e) Research is key. If rental income is your goal, you need to make sure you buy or build investment property in areas close to transport routes, shops and schools. If capital growth is your aim, you might be prepared to earn a lower rental income now, with the goal of subdivision (subject to necessary consents) or demolition of an own home and construction of two new ones. Your Professionals Property Manager can assist you greatly in information about suburbs where there is high rental demand – and – the features that make rental property attractive to tenants.
f) Find the right loan. Again, there are options aplenty, but some that are particularly of interest to property investors will be ‘Interest Only’ loans and Line of Credit options.
g) How much do you need to borrow? Remember to budget for additional costs, such as stamp duty, mortgage insurance, transfer fees, settlement fees, etc.
This should get you started. Remember – if you’re considering investing in real estate, it isn’t the time to cut costs when it comes to seeking expert advice.
Your Professionals Property Consultant and Professional Property Management team is here to help. Please feel free to ask us at any time.