Maximising your investment property returns isn’t something only experienced investors can do. You, too, have chances…

Hi there. Welcome to ASK Financials guide. I am Amol Khuntale, few of you know me and many don’t. The ones who know me know that I address the regular queries that I come across as a mortgage broker. 

This time we will talk about a few miraculous tips for buying an investment property.  

You all will agree to me when I say that real estate investments have a strong track record of appreciation and attractive tax offset benefits, making them an attractive option for many Australians with lower risk thresholds. Owning a property is an excellent way to generate passive income, jumpstart an investment portfolio, and climb the wealth ladder.

An investment property purchase is a popular investment option for Australians. The goal of purchasing investment property should be to build wealth and ensure one’s financial stability. While it’s true that property investments often provide good returns, this is by no means a guarantee and investing in real estate won’t magically render you wealthy overnight. Remember that the success or failure of your investment in helping you achieve your financial objectives is directly proportional to how well you handle your investment. When you include in the money you’ll make from rentals and the tax breaks you’ll be eligible for, the cost of owning investment property might really be rather modest.

Now that we have discussed so much and came to the conclusion that investment in properties can give you and your family future security, it is also important to know what is an investment property?

What is an Investment Property?

Let us begin with the most fundamental aspects. Any piece of real estate that you acquire with the expectation of a future financial gain is considered an investment property. Purchasing real estate is like making a long-term and short-term investment in the value of the property.

A seasoned investor may have dozens of properties under their umbrella, while a novice might do well with only one or two. Real estate investing is a fantastic method to put large sums of money to work for you rather than letting it collect dust in a bank account.

Those that invest in real estate do so with the intention of rehabilitating the property and then selling it, renting it out, or holding on to it for the long haul. Most people buy houses so they have a place to live; for them, the profit they get when they sell is an added benefit.

Real estate ownership transforms you into an investor; thus, you must master the art of prudent financial planning in order to amass sufficient wealth to live the life of your dreams.

But you must also understand that every right investment needs the right strategy, and these strategies include in depth industry research and years of learning. 

Moving ahead in the next section we will talk about the investment strategies. 

Top Investment Strategies

Picking the right property at the right price

Choosing a property with good appreciation potential is the most significant choice you can make as a real estate investor, thus it’s crucial to purchase at a fair price.

Being patient and informed may let you purchase real estate assets below their genuine market worth, despite the fact that real estate is more difficult to price. If you put in the time and effort to learn the market value of similar properties in the area, you’ll quickly become an expert at estimating a property’s worth and be able to spot a steal when you see one. 

It is highly recommended that you exercise caution when considering the purchase of real estate in an unfamiliar area, especially when approached by real estate agents touting properties located offshore or across state lines. It is worth noting that these agents often receive hefty commissions, which can lead to exorbitant property prices. In the event that you come across a property that piques your interest but you are uncertain of its true worth, we recommend getting in touch with us or another lender to set up an impartial appraisal on the bank’s behalf. Once you have this information, you may often use it as a powerful bargaining chip.

Home units, homes, and land are all types of residential property, and each might have its own unique performance history. There will be no rental revenue from unoccupied property, but it might rise in value if you buy it in a region where there isn’t much of it. Compared to a standalone weatherboard house, the ongoing maintenance expenses of a dwelling unit may be lower. Although you should conduct your research, you should be aware that houses in locations with greater rental returns sometimes do not provide as many prospects for capital development.

Cash Flow Is The King

Property investments are a certain way to amass money in the long run; nevertheless, you should think of them as medium- to long-term investments, so you’ll need to be sure you can keep up with your mortgage payments. You should wait to sell your investment property until you’re ready, since doing so too soon might put you in a difficult financial position.

Since you can deduct a lot of the costs of owning the property from your taxes and collect rent, keeping an investment property and paying the loan can actually be pretty cheap. Just keep in mind that as your income grows, so does your rent, so things should get easier as time goes on.

You should be cognisant of the taxes associated with real estate investment and include them into your calculations.  This is an area where you should seek the counsel of your accountant, since things might evolve with time. You have to think about land tax, stamp duty, and capital gains tax. Keep in mind that interest rates are subject to change; nonetheless, investors in real estate may often anticipate being able to raise rent during periods of increasing interest rates.

Find a Mortgage Broker and Let Him Work

A mortgage broker is a professional who helps you to keep things in order. They can help you with the right advice and get the best possible value for your property.

Understand the Market Dynamics

Consider what other homes are available in the nearby vicinity, and chat with as many people and real estate professionals as possible; they will tell you whether one side of a street is preferred over the other. 

To understand the market dynamics you can connect us, we’ll be happy to help you with the right advice.

Use the equity from another property 

Benefiting via equity in your home, or equity from another property investment, can be an effective way to buy an investment property. Equity refers to how much money you truly own in your property. It is computed by subtracting the value of your property from the amount owed on your mortgage. 

Negative Gearings

Negative gearing may provide tax advantages to property owners if the cost of the investment exceeds the revenue generated. Under Australian law, you may deduct the expenses of borrowing and maintaining a property from your overall income. However, you may only get a tax advantage if you had other taxable income to begin with. So, although you are really losing money on the property, the benefit is that the loss may be used to offset the amount of tax you pay on your other revenues. However, you should not purchase an investment property only for the purpose of receiving a tax advantage.

Be aware of property age and condition

Even if you use negative gearing, having to repair the roof or hot water service in the first few months of owning the home could really hurt your cash flow and income.

So, it’s a good idea to hire a professional building tester before you buy and then once a year after that to do a full check of the property to find any problems.

You should also hire a skilled tradesperson who is licensed to do the job and has enough insurance to cover you in case they do a bad job.

There are times when it’s a good idea to buy a property that isn’t in the best shape. This is because you can fix it up and raise its value, which can increase your gains on both capital growth and rental income. When you buy shares, you can’t do that anymore.

Long term view to manage risk

Remember that property is a long-term investment, and you should not expect property values to rise immediately. The longer you can afford to commit to a property, the better, and as you accumulate wealth, you may consider acquiring a second investment property – try not to be too greedy and strike the correct balance between financial security and the capacity to enjoy life. Financial security is important, but life is more than just arithmetic.

Finally, unlike shares or managed funds, you cannot simply sell a portion of your investment property if you need money. In summary, be careful, but keep in mind that record migration and rental property scarcity are important considerations to consider when investing in property.

Ready to begin your investment journey

To achieve financial freedom it is important to have strategic understanding and excellent management skills combined with long term planning. Working closely with ASK Financials will give you an  experienced investment strategist which will help you diversify your portfolio and allow for growth potential.

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