Investments Property Article fyi:- Property has always been a popular investment option in Australia,
particularly investing in residential units or houses. It is an asset class
that has historically, over the long term, produced a reasonable return.
However if you are buying an investment property directly (as opposed to
investing in a managed fund) then the specific property that you choose will
have a significant influence on whether you make a good long-term profit or
not. Here are some tips to help you out.
Step 1 - Location For a successful investment, you must acquire the right property in the
right location at the keenest possible price and with its long-term
viability in mind - in both terms of good rental potential and capital
growth. Check for proximity to transport facilities, schools, shopping centres,
sports and entertainment facilities and areas of future jobs growth. The property needs to be located in a safe, clean, attractive environment
and preferably the area will have an already-established high rental demand. Step 2 - Buy quality The quality of the property is crucial. The building must be appropriate for the market - for example, with at least
three bedrooms if located in a family rental area, or with some security if
inner-city high-rise. It should be well-built and have low maintenance buildings and external
areas (check that the gardens and any other outdoor areas are in good
order). If it is an apartment, make sure it is large enough to meet the approval of
your bank or lending institution.
Irrespective of the type of property you buy, a pre-purchase building
inspection and pest inspection is a must. Step 3 - Gross versus net returns Long-term capital growth is highly desirable when investing in property, but
on a year by year basis you will also receive income in the form of rent.
It's useful to understand the difference between your gross return (rent)
and your net return (the rent minus your investment expenses). Some examples of typical investment expenses include interest on the
investment loan, rates, insurance, body corporate fees and maintenance. The net return (or loss) is the figure that helps you to understand how your
investment is travelling. Step 4 - Coping with vacancies Approximately 30 per cent of Australian households rent, providing a large
pool of people who are housed in or looking for rental accommodation. Nevertheless, you do need to be prepared that your investment property may
well be un-rented for a period of time, hence it is important to allow
yourself a cash buffer to ensure that you can continue to pay the costs of
owning the investment even if you are not receiving rental income. You
should calculate on a loss of around 2 per cent of your gross possible
returns for each vacant week. However a well kept, appealing property in good condition and in the right
area should not be vacant for long periods. If you are managing the property yourself and having difficulty finding
tenants, you might want to approach some local property management agencies
to see if they can help (for a fee, of course). Step 5 - Triggers for failure As we mentioned at the outset, if you are making a direct investment in an
investment property then the specific property that you choose will have a
significant influence on whether you make a good long-term profit or not.
Some common triggers for failure include: The purchase price was too high.
The property is in an area of low capital growth potential.
The maintenance costs are too high.
The rental income is too low.
Vacancy periods are too long or too many.
The loan taken out was structured wrongly.
Some tax deductions are missed.
Step 6 - Top tips Avoid buying a property on impulse; spend time researching the area that you
are considering thoroughly before you commit to a purchase.
Pay for an independent property valuation before you buy.
Also get independent advice on the sale contract before you sign.
Remember that interest costs and property-related expenses are tax
deductible.
Speak with your accountant about the issue of depreciation.
Have a long-term view.
Best regards,
Linda and Carlos Debello
http://www.ljgrealestate.com.au
http://twitter.com/GillandDebello
http://au.linkedin.com/in/lindajanedebello
http://gillandrealestate.wordpress.com/
http://www.facebook.com/pages/LJ-Gilland-Real-Estate-Pty-Ltd/169194919788253 Confidential email:- The information in this message is intended for the
recipient name on this email. If you are not the recipient please do not
read, copy distribute or act upon the message as the information it contains
may be privileged. If you have received this message in error, please
notify the writer by return email. Thank you very much for your assistance
in this matter and your co-operation.
particularly investing in residential units or houses. It is an asset class
that has historically, over the long term, produced a reasonable return.
However if you are buying an investment property directly (as opposed to
investing in a managed fund) then the specific property that you choose will
have a significant influence on whether you make a good long-term profit or
not. Here are some tips to help you out.
Step 1 - Location For a successful investment, you must acquire the right property in the
right location at the keenest possible price and with its long-term
viability in mind - in both terms of good rental potential and capital
growth. Check for proximity to transport facilities, schools, shopping centres,
sports and entertainment facilities and areas of future jobs growth. The property needs to be located in a safe, clean, attractive environment
and preferably the area will have an already-established high rental demand. Step 2 - Buy quality The quality of the property is crucial. The building must be appropriate for the market - for example, with at least
three bedrooms if located in a family rental area, or with some security if
inner-city high-rise. It should be well-built and have low maintenance buildings and external
areas (check that the gardens and any other outdoor areas are in good
order). If it is an apartment, make sure it is large enough to meet the approval of
your bank or lending institution.
Irrespective of the type of property you buy, a pre-purchase building
inspection and pest inspection is a must. Step 3 - Gross versus net returns Long-term capital growth is highly desirable when investing in property, but
on a year by year basis you will also receive income in the form of rent.
It's useful to understand the difference between your gross return (rent)
and your net return (the rent minus your investment expenses). Some examples of typical investment expenses include interest on the
investment loan, rates, insurance, body corporate fees and maintenance. The net return (or loss) is the figure that helps you to understand how your
investment is travelling. Step 4 - Coping with vacancies Approximately 30 per cent of Australian households rent, providing a large
pool of people who are housed in or looking for rental accommodation. Nevertheless, you do need to be prepared that your investment property may
well be un-rented for a period of time, hence it is important to allow
yourself a cash buffer to ensure that you can continue to pay the costs of
owning the investment even if you are not receiving rental income. You
should calculate on a loss of around 2 per cent of your gross possible
returns for each vacant week. However a well kept, appealing property in good condition and in the right
area should not be vacant for long periods. If you are managing the property yourself and having difficulty finding
tenants, you might want to approach some local property management agencies
to see if they can help (for a fee, of course). Step 5 - Triggers for failure As we mentioned at the outset, if you are making a direct investment in an
investment property then the specific property that you choose will have a
significant influence on whether you make a good long-term profit or not.
Some common triggers for failure include: The purchase price was too high.
The property is in an area of low capital growth potential.
The maintenance costs are too high.
The rental income is too low.
Vacancy periods are too long or too many.
The loan taken out was structured wrongly.
Some tax deductions are missed.
Step 6 - Top tips Avoid buying a property on impulse; spend time researching the area that you
are considering thoroughly before you commit to a purchase.
Pay for an independent property valuation before you buy.
Also get independent advice on the sale contract before you sign.
Remember that interest costs and property-related expenses are tax
deductible.
Speak with your accountant about the issue of depreciation.
Have a long-term view.
Best regards,
Linda and Carlos Debello
http://www.ljgrealestate.com.au
http://twitter.com/GillandDebello
http://au.linkedin.com/in/lindajanedebello
http://gillandrealestate.wordpress.com/
http://www.facebook.com/pages/LJ-Gilland-Real-Estate-Pty-Ltd/169194919788253 Confidential email:- The information in this message is intended for the
recipient name on this email. If you are not the recipient please do not
read, copy distribute or act upon the message as the information it contains
may be privileged. If you have received this message in error, please
notify the writer by return email. Thank you very much for your assistance
in this matter and your co-operation.
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