Finance Tips

10 Tips To Enhance Your Investment Property Purchase!!

By admin ⋅ April 9, 2008 ⋅  Email this post ⋅  Print this post ⋅ Post a comment

Real Estate has always been regarded as one of the safest and most popular forms of investment over the years! Good old bricks and mortar! We’ve always been told to invest in real estate…it’s tangible, you can see it, it’s easier to understand than other investments such as shares, managed funds etc..and it’s relatively safe (or so we are told!). Property will always be in demand and will always be a very popular way to invest. Here are some tips and things to consider when you’re ready to purchase property for investment!

Don’t get emotional about your property!

First and foremost you are an investor. Look at property as a ways to make money! And the more money you make, the better!! You need the property to make you money, not to have all the latest fixtures and fittings!! I know a property investor who has actually never set foot in a few of his investment properties!

build your property portfolio one property at a time!!

Property moves in cycles!

Somewhere in the country property values are increasing while maybe homes in your neighbourhood are going the other way! Who says you need to purchase where you live? It’s a matter of finding the next booming area and capitalizing on it!

Positive Cashflow!

Is where the income from the investment property and all the deductions are more than the expenses the property incurs. These properties can be hard to find but they are out there, it’s just a matter of doing the research! try and keep as close to positive cash flow as you can as this will keep you in the market longer and costs you less out of your own pocket!

Negative Gearing!

Is where the income does not cover all the expenses of the investment property and this amount can be offset against your income…so in other words this amount is tax deductable. Banks also use negative gearing in their servicing calculators if you have any investment loans. Sure, it’s a tax deduction but at the end of the day you are still losing on the property…aim for as close to positive cashflow as you can!

Debt to Equity Ratio

Yes there are Banks who will give you 97% LVR to purchase an investment property but be cautious. Property is an investment and there is no certainty in any investing! There is ALWAYS a risk! What happens if you’re at 97% and the property value decreases…it can happen! Try and use 80% as a guideline, this gives you a comfort zone if something bad were to happen!

Capital Gains Tax (CGT)

There’s not much fun associated with CGT but think about it…CGT is a by-product of success!! I’d much rather take a profit and pay the CGT than have to sit on a loss for years! Remember, you always have to do better with your money!!

One Bedroom Apartments

Are often well tenanted, often near the CBD or Educational Institutions. Often yield better and have less vacancies. Are often generally more affordable so have a better entry price and are always in demand….An option that a lot of people don’t think about! Remember, don’t get emotional with your investment property!

Keeping your Property Tenanted!

There is no magic formula! Do plenty of research before buying in the area you choose. Make sure there is constant demand, a growing area, great economic structure for eg. universities, schools, shops.

Do I Manage the Property by Myself?

Why? to save $10 a week? The answer is NO!! Make sure you have a property manager you are happy with and is professional…it will save you $$$ in the long term!!

Location, Location, Location!

Can be associated with Research, Research, Research!!!! Whatever your goal for your investment property whether it be positive cashflow or capital growth in a few years, do your research and think about location!!