The decision over what type of property is the most beneficial, when it comes to investment properties, is one that has been debated for many years. Levels of capital growth, purchase prices, the amount of rent the property is expected to bring in and the current Australian economy are all factors that need to be taken into consideration.
Property is a high growth investment and investors make money from capital growth, rent and tax benefits such as negative gearing, depreciation allowances, and government grants.
With all investments, do your homework before you invest and always seek the advice of a professional before making any major financial decision. Always have a well thought out strategy with measurable goals in order for you to quantify the worth of the investment
• Tax benefits – a number of deductions can be claimed in your tax return e.g. agent’s fees, repairs and maintenance, travel to and from property to facilitate repairs, building depreciation.
• Negative gearing – tax deductions can also be claimed as a result of negative gearing, where the costs of keeping the investment property exceed the income gained from it.
• Property is a tangible asset and is considered less volatile than investing in the stock market.
• Cannot claim deductions on:
o acquisition and disposal costs of the property,
o expenses not incurred by you for example water and electricity charges borne by your tenants
o expenses that are not related to the rental of a property, such as expenses connected to your own use of a holiday home that you rent out for part of the year.
• Real estate investing is not a quick buy and sell environment unlike the stock market.
• Insurance is necessary to protect yourself from some tenants who do not pay rent on an ongoing basis, who try and reach in your pockets, or when someone accidentally hurts him or herself on your property.
Tips to Property Investment
• Determine what type of property you wish to invest in – house versus unit.
• Keep the investment price within your own (affordable) price range.
• Research the potential rental income of the property and the capital growth history of the area – a great location will bring in higher rent but also stronger capital gains.
• Forward thinking is an important part of investing – buy a property in an area that you consider will increase in value in the future for a number of different reasons.
• Avoid areas that have considerable competition in renting or selling.
• Proximity to desirable locations e.g. close to schools, public transport, shopping centres, parks, entertainment etc.
• Renovation potential – will the property need to be fixed before being placed on the market and is it accounted for in your budget.
• Regardless of the suburb, security is now a strong consideration of any apartment purchase. Both security of the common areas e.g. foyer, car parking and the specific apartment itself, is paramount for both rental and re-sale value. If purchasing a ground floor be extra attentive to security issues.
• The age of the property is quite important. A brand new apartment will offer the investor substantial tax benefits via deprecation whilst also potentially having less upkeep and being more in keeping with current trends to maximize rental return and resale figures.
• Have a thorough screening process when choosing candidates to rent out your property to.
• Keep digital, electronic and physical records of all the transactions, receipts, contracts etc.
Here at The Quinn Group, our experience team of Lawyers, Accountants, Financial Planners and Tax Agents can assist you with personalised advice for your individual investment property needs. To find out more please call us on 1300 QUINNS (784 667) or click here to submit an online enquiry.