By: Vivi Octaviani
One of the most popular ways to invest is by buying an investment property. Owning an investment property, could potentially increase your wealth and secure your financial growth. However many misconceptions out there such as property investment always bringing positive outcomes with instant financial gain can backfire on your plan.
You need to be aware that you have to effectively manage your investment to discover if this type of investment is working for you. With the right property market research, professional advice about rental income and tax deductions, the costs of owning an investment property could be surprisingly affordable than you might think.
- Choosing the right property
Real estate is more tricky to price compared to buying shares, where the value of a company is transparent. But this shouldn’t agitate you on investing in real estate. Be patient and get all the knowledge about the area you’re aiming for, such as the market price, demographics, and surrounding amenities; try to take the opportunity to buy it below the real market value. Avoid purchasing a property in an area that you are not familiar with. Targeting “House and Land package” in the growing suburbs or “off the plan” could also be the smart options that are worth having a look into.
- Calculate cash flow and manage your risks
Property investment is a long-term type of investment, but you will have to treat it as a medium-term investment. You have to calculate the affordability of maintaining your mortgage repayments for a long period of time. If you facing some financial difficulties, you will possibly have to sell your investment property at the wrong time and make a loss. Talk to your accountant and make yourself aware of all forms of cost to balance the rental income such as Stamp Duty, Capital Gain Tax, Land Tax as well as interest rates. With this long-term investment in mind, you should commit to one property at a time and build up your equity before thinking about the next one. Unlike buying shares or managed funds that you can sell by parts whenever you need cash, investment property is a whole commitment.
- Find a reliable local property manager
A good thing about finding a reliable property manager is that they will take all the hassle out of managing your own investment property. They usually hold the real estate agent licence that can advise you with managing tenants and bring out the best possible value to your property like when you should review rents, property law, your rights and responsibility as a rental provider to taking care of maintenance with your approval. Another good thing is the cost to have a property manager is tax-deductible, with most agencies usually charging the management fee by the percentage of the rent paid and deducted from the rent.
- Make your property attractive to renters
Great professional photography is very important to present your property and stands out from the crowd. A once-off cost that you can keep as long as you desire. Make sure the look of your property has neutral tones with a clean kitchen and bathroom. With a well presentable look, you will be able to set the maximum rental rate and attract better quality tenants to apply. Maintain your property well as it is the place where you would like to live yourself because one day when you want to sell the property your target market is not just property investors but also owner-occupiers, who are looking for a homely place to live in. A wider market for the property means you will be able to maximise your selling price.
Disclaimer: Information provided in this article is general in nature and does not constitute financial advice. Readers must not rely on this information to make a financial or investment decision.