Investing in Property
Many Australians like to invest in property, and here are a few tips that may help:
Firstly, are you a genuine investor? By that I mean is your sole aim to increase your wealth, or are you looking for lifestyle benefits as well?
If you are looking for somewhere that you can have holidays in, or retire to, or move into in a couple of years, then these tips may not be for you because your focus will be on property’s and locations where you would like to live and the chances are you will end up with a property that is not a good rental property (but may suit your lifestyle!).
A good rental property is generally one that will be attractive to renters, but easy to maintain and located close to transport, schools, shops and areas where there is plenty of jobs. My personal preference is for a house and land because ultimately it is the land that is scarce (and therefore will increase substantially in value) whereas with flats and apartments demand can be met by building taller and better apartment blocks.
The building should be in good condition (always make a building and pest examination part of the special conditions in a contract) and newer buildings may have the advantage of having a capital allowance and a greater depreciation allowance. These allowances help reduce the profit or increase the loss and therefore are valuable in saving tax.
Wealth is created by owning a rental property in two ways: by income and by capital growth. The income is important as it comes in on a regular basis and helps to pay the expenses of owning a property (rates, water rates, insurance, maintenance, agents fees, etc.) whilst the capital growth is not realized until the property is sold. A tax “problem” may be created at this time and assistance from an accountant or financial advisor should be sought to manage this gain when the time arrives.
In fact, I believe help should be sought every step along the way, particularly if there is substantial borrowings involved, and a wrong decision early in the process could have a significant impact on the overall success of the venture.
I hope this blog has been helpful in answering some of your initial questions and has whet your appetite for property investment. It has only scratched the surface in covering the many facets of investing in property. Hopefully it has raised many questions for you and I would be happy to answer these at anytime.
SVS Management Group