If you are considering investing in property, you may be aware of some of the potential benefits that are possible for this investment type. Property professionals, such as Templeton Property, know that while an investment property may generate capital growth, provide rental income, and bring particular tax advantages through negative gearing, it’s crucial that investors have a sound property investment strategy.
Potential Benefits of Investing in Property
For many would-be investors, the financial gains that can possibly be made through investment in property are understandably alluring. These benefits include:
- The generation of capital growth – If you are prepared to hold on to an investment property for a period of time, and not sell it as quickly as possible, it is likely that the value of the property will increase over time.
- The generation of rental income and yield – Rental income will help to offset the costs of owning and paying for an investment property. To work out how lucrative this may potentially be for you, calculate the rental income received in the course of a year, deduct costs and divide by the price paid for the purchase of the property.
- Tax advantages made available through negative gearing – When an investment property is negatively geared, you are able to deduct the costs associated with ownership of the property from your total income. The real benefit of this is that your tax bill is correspondingly reduced.
Things to consider if Purchasing Property for Investment Purposes:
1. Seek Professional Advice
Particularly if it is the first time that you will invest in property, seek the advice and guidance of a credible, experienced, and skilled professional, such as an accountant or financial planner. Before committing to a purchase, it’s vital to understand what you can and cannot afford and how your life and financial situation will be affected when you are committed to mortgage repayments, as well as the costs of repairs and bills.
2. Understand that you are not Buying a Home for Yourself
The selection of an investment property should be approached differently to how you would go about choosing your own home. Because you ideally want to have your investment property constantly tenanted and encounter few problems in securing good quality tenants, focus on property features that most appeal to renters, such as low maintenance needs and access to transport, amenities, facilities and services.
3. Understand the expenses Associated with Buying an Investment Property
When you buy such a property, you will need to pay stamp duty and real estate commission. You must also cover expenses such as: water and council rates and strata levies. It is also important and worthwhile to have Landlord Building and Contents Insurance cover in place, so that you are covered if an unexpected situation arises.
4. Understand the Market and Purchase a Property that Matches your Strategy
Ensure that the property you purchase fits with your investment strategy. For example, are you happy to negatively gear? It’s important to choose a loan that is appropriate and manageable for you. In many cases, an interest only loan helps to reduce repayments and provide more cash flow, but can cost you more over time. Look at all your financing options before deciding which is best for your situation.
To be aware of the value of your property, it’s advisable to keep up-to-date with information about the latest trends in property and sales in your locality.