Thinking of investing in property? Great idea. We'd love to help you get started, however, it’s important to have a clear long-term real estate investment strategy. Are you going for high rental returns for the short term or are you more interested in long term capital growth?
If you’re thinking about investing in property for the first time, it’s important to seek professional advice.
Investing in property has several benefits, including the potential to:
• Generate capital growth – increase in the value of your property over time
• Generate rental income and yield – annual rental income less maintenance & mortgage costs
• Gain potential tax advantages associated with negative gearing – you can deduct the costs of owning your investment property from your overall income, reducing your tax bill.
WHAT TO BUY
If you’ve decided that investing in property is the way to go, it’s important to recognise that the way you might choose an investment property is very different from how you would choose your own home. Some points to consider:
• Buy a property that fits your strategy, e.g. do you want to negatively gear, are you interested in commercial or industrial real estate, do you seek properties which you can improve?
• Understand all the expenses including, stamp duty, strata levies, council and water rates, property management fees.
• Consider getting Landlord Protection Insurance to cover you if the unexpected happens.
• Whether you can cover mortgage repayments if the property is vacant for a period of time.
• Choose a loan that suits you and consider an interest only option, as it will lower repayments and increase your cash flow.
• Keep up to date on the latest property trends.
IS IT BETTER TO BUY AN APARTMENT OR HOUSE?
• Do your research to find out what the market demands locally.
• Talk to a First National Balwyn North agent to find out what’s popular in the area.
• If you have a location in mind, focus your research on what type of property is in demand, historically, in that area.
• If you plan on building a portfolio of properties, a mixture of houses and apartments is a good strategy.
• Some investors like to buy apartments because the Owners Corporation looks after the common property and overall building management. Some dislike Strata Title quarterly levies and the risk of ‘Special Levies’.
• Apartments are usually less expensive so the answer may lie in affordability.
• Some property investors believe apartments are too similar to one another and that houses offer more potential to differentiate and add value.
• Investors who buy houses must bear 100% of the costs of maintenance whereas strata title and community title owners share costs.