If you’re looking for a stable and secure investment, property is a solid option. Far less volatile than other investment strategies, an investment property has the potential to deliver consistent rental returns for years to come. While you may start out with a single property, careful consideration and management of your investments could see you grow this to a full and profitable portfolio with the help of a broker.
When purchasing an investment property, you need to think tactically about where you will buy and the type of person who generally resides in this area. Doing your research and having a clear understanding of the market and the areas where property is most likely to increase in value is essential. When considering your budget and return on investment, it’s not just about your rental returns, you need to factor in ongoing costs also.
If you earn less from an investment property than it’s costing you, you’re said to be negatively geared. The motivation to be negatively geared is that it reduces your taxable income and you accept a short-term loss in the hope of a capital gain later.
The cost of having a professional manage your rental property is between seven and ten per cent of your total rental income each week. So, for a property with an average rental return of $550 per week, you would need to pay the agent between $38.50 and $55 per week, which amounts to between $2,002 and $2,860 per year. If you compare this to the time commitment and potential costs you could face if you were to represent yourself at the tribunal, this weekly management fee is marginal.
Unlike a home loan, costs associated with an investment loan are tax deductible (eg interest, repairs, rates, depreciation, etc). However, be aware that any rental income will generally increase your taxable income. Another key difference is that any appreciation in the value of an investment property (capital gains) is taxed.
Along with the cost of your deposit, you need to account for the cost of building inspections, stamp duty, conveyancing fees and any legal costs.
Ongoing, as the owner of an investment property, you will need to pay council rates, water rates, insurance, body corporate fees, land tax, property management fees, repairs and maintenance costs.
February 05, 2020
There's more to selling your home than putting up a ‘For Sale’ sign on your front lawn.
Here are the first things you should check off your list to help you get a favourable result from your investment and ensure the selling process runs as smoothly as possible.
Speak to your broker
If you’re considering selling your home, speak to your finance broker to ensure that your plans after selling – whether it’s buying a similar property, upgrading or building – are actually feasible, you don’t want to sell your home only to discover you can’t achieve what you had in mind afterwards.
Choose a quality agent
A website and promotional material will always highlight the agent in the best possible way, but word of mouth and past client reviews will show their true colours.
Asking family and friends who have purchased or sold a property about their experience is a great way to ensure the agent you’ve enlisted will provide quality service.
Make sure the agent specialises in your area and is someone you feel comfortable around as they don’t just negotiate prices on your behalf, they also act as a mediator and represent you as a vendor.
Prepare the paperwork
Getting all the documents required together is a tedious yet necessary part of the property selling process.
From a disclosure document to a home loan pre-approval, ensure all the paperwork is prepared in time to ensure it all runs smoothly. For example, before a property can be marketed for sale, your agent will require a copy of the contract of sale from your legal representative.
Don’t take things personally
Remember this is a business transaction; don’t feel insulted if you receive feedback on the property that doesn’t match how you feel about your home. To ensure you come out with the best deal, remove all emotion and think of your house as a commodity.
Present your property well
Thinking that your home will sell itself can be a costly mistake. Despite how much you like the way you have it set up, furniture, flooring and painting changes can make a big difference to the property’s wider appeal, and marketing it widely can increase the competition and, therefore, the price.
Trust your agent's strategy, engage in a thorough marketing campaign and invest in presenting your property in its best light to help secure the best financial result.
Surround yourself with a good team
Having a good team – including your broker, conveyancer and agent – that communicates well will ensure any issues that arise during the sale can be quickly and easily dealt with.
MFAA Accredited finance brokers must meet the highest industry standards, so they will be able to refer you to a great agent and other professionals that will help make the home selling process flow with minimal stress.
Why meet with multiple lenders when your broker can do it all for you.
Brokers have access to a wide range of lenders and products.
Secure a loan that is suitable for you both now and into the future.