If you have been monitoring the property market for a while now, you might know that now is the perfect time to start or build on your investment portfolio.
Buying an investment property may feel like a big step, but there are thousands of new investors, young and old, diving in every year, setting themselves up for a better financial future. But how do you know if you are ready to dive in and start reaping the rewards?
Here are a few signs that you might be ready to get started.
You have your financials in order
If you’ve found yourself thinking about retirement and your future finances, that’s a clear indication it’s time to act. The earlier you act, the longer you have benefit. You don’t want to wait until you are in your 50s and 60s to start in the investment game. Start seeking out professional advice as soon as you start thinking about investing.
You are ready to take the next step
If you’re feeling well established and wondering how to prepare for your future — that’s a pretty good indication you’re in a position to begin investing.
Sit down a establish some investment goals to get yourself started. Start by setting your long-term goal. Then, break it down into smaller steps and shorter-term goals. This will help you stay focused and not lose sight of what you’re hoping to achieve.
Some common goals for investment include planning for retirement, providing an asset for family members, earning a regular rental income, building equity to buy a home or other major purchase, or minimising taxable income.
It’s important to always keep in mind that property investment is usually a medium to long-term prospect. Consider how your financial situation is likely to change over these time frames.
You understand what is involved
Have you calculated your cash flow? Do you know what depreciation is? Do you know what type of investment path you are going to take? Do you know what makes a good investment? These are all great questions to ask yourself. We will break down a few below.
Cash Flow: Cash flow is literally the cash that flows to and from the property. Cash flows in the form of rental payments. Cash flows out to pay the running costs, which include mortgage payments, rates, utilities and strata or body corporate fees.
Depreciation: If your investment property costs more to run than it produces in income, you can deduct the difference against your overall taxable income. This is known as ‘negative gearing’. One way to maximise your deductions is by claiming depreciation. All the structural elements, fixtures and equipment in your investment property, from carports to carpets and from balconies to blinds, will eventually degrade and need replacing. Depreciation allows you to claim that wear and tear as an annual deduction.
A good investment: What makes a good investment property will come down to three key fundamentals: rental yield, capital growth potential and underlying demand. So you will want to ensure you are weighing up each of these factors.
You know what kind of investment property you are after
Before buying an investment property, get clear on your goals. Some types of real estate are better for positive cash flow, which is ideal if you want something that will supplement your income sooner. Others might cost you a bit more to run but will also increase more in value. If your plan is to sell it for a profit later, this might be where your focus is.
Take into consideration the following:
- Configuration – # of beds, baths, car
- Whether the property needs any renovations/updates
You have decided on a property manager
A property manager can help you attract, vet and install a tenant into your investment property. But did you know that they can help even before you’ve bought a place? As experts in the area, they’ll be able to tell you what kinds of property tenants are looking for, where the best locations are and what rental demand to expect.
If you are wanting some expert advice or a rental appraisal on your current investment property, give us a call today on 3202 3040 and we would be happy to help!
TAYLAH ANTONIOLLI – MARKETING & COMMUNICATIONS COORDINATOR
07 3202 3040
A go getter and doer, Taylah is a no excuses, get the job done kind of girl. With a strong work ethic and high attention to detail, Taylah is happy to help out wherever she can. Armed with a degree in business specialising in marketing and public relations Taylah brings fresh ideas and innovation to the iThink team.