Choosing to invest in property is a big step. With the right knowledge and tools, we can help you plan your investment.

Research and having the right people to assist you are key when investing in property.

It is definitely beneficial to research the property market thoroughly before making any decisions, and we are excited to assist you with your financing choices. Recent declines in the share market, tight rental conditions in most capital cities, and signs of a potential increase in property prices have led many everyday investors to return to investing in real estate.

Overall, property in Australia is still viewed as a reliable investment due to its steady and consistent growth over time. However, it is important to note that real estate is not a quick return investment. Typically, property experiences a cycle of seven to ten years, marked by periods of highs, lows, and stability in between.

Fortunately, Australia is facing an ongoing housing shortage, and the tax system allows for negative gearing on property. This means that any investment losses can be claimed as tax deductions, which continues to position housing as a strong long-term investment.

However, in the aftermath of the Global Financial Crisis, lending standards have tightened, making lenders more cautious about who they lend to and for what purposes. We are here to help you find the right lender and loan that suits your specific circumstances in this more challenging environment. Additionally, we can assist you in navigating the various investment loan options available, giving you more time to find the ideal property.

Here are some tips to help you find the right rental and maximize your benefits.

Unit or house?

House prices tend to rise more significantly than unit prices, which can provide greater potential for capital gains over time. However, owning a rental home comes with added responsibilities, such as maintaining gardens, lawns, and sometimes even a pool.

On the other hand, units or townhouses may not appreciate in value as quickly, but they are generally easier to maintain. They may also be easier to rent, depending on factors such as location, condition, and size.

Location, location

You’ve likely heard this before, but location can have different meanings when it comes to rental properties. Renters often seek maximum convenience, so it’s important to consider properties that are close to schools, major shopping centers, and public transport.

Take your time researching your target areas. Look into recent property price trends, future predictions, rental vacancy rates, and any proposed infrastructure improvements.

Additionally, spend some time exploring the area as if you were a renter to gain a firsthand understanding of the local market.

Remove the Emotion

One of the biggest mistakes you can make with any investment is to buy with your heart instead of your head. Remember, a rental property is not your “home sweet home.”

While a well-presented property is appealing, it’s important to prioritize practicality over luxury. Ideally, look for a property with a neutral interior colour scheme, durable and hassle-free flooring and window coverings, a low-maintenance yard, and ample storage.

If you are considering buying an older-style unit, look for one that includes an internal laundry, a garage or parking space, and minimal stairs—unless there’s a stunning view from a higher level, which can enhance the property’s value.

Don’t forget the Extras

Investing in a property involves ongoing financial commitments beyond just loan repayments. It’s important to ensure that you can cover expenses such as land and water rates, as well as maintenance and repair costs. Tenants have the right to receive repairs or replacements promptly according to their rental agreement, so it’s essential to have the financial means to address these issues.

Additionally, if you’re considering apartments or units, be aware that there are body corporate fees. In some modern complexes that feature professional landscaping and shared amenities, such as swimming pools, these fees can amount to thousands of dollars.

Cover your Investment

Make sure you obtain landlord insurance. This policy will protect you against damages caused by a tenant, as well as any unpaid rent if a tenant vacates without notice. It also covers other standard risks, such as fire or storm damage.

If you are investing in a strata title property, ensure that the body corporate has adequate building insurance to cover the cost of rebuilding the complex at current market prices. It can sometimes be challenging to determine what you need to cover versus what is covered by the body corporate.

A good rule of thumb is that everything from the interior wall paint inward is your responsibility, while everything outside is covered by the corporate body.

Any interest?

Many property investors utilize interest-only loans because the interest payments are tax-deductible. This strategy assumes that the property’s value will increase over time, resulting in long-term financial gains.

This approach is particularly beneficial for high-income earners who can take advantage of negative gearing. However, if you choose to positively gear your investment—meaning you generate a profit from the rental income after covering expenses—you might want to consider a principal and interest loan. You can then use the profits to reduce the principal amount of the loan.

Please note that you will still be liable for taxes on any income generated from your investment. It’s advisable to consult your accountant about your tax situation so that your broker can assist you in finding the right loan.

Manage your Investment

Managing a property requires both time and energy. If you find yourself short on either, it may be wise to hire a professional property manager. They can handle advertising the rental, screening and selecting tenants, collecting and processing rent payments, coordinating repairs and maintenance, providing condition reports, and resolving any disputes that may arise. Consider asking other local landlords for referrals to reputable property managers.

Additionally, it is recommended that you conduct property inspections twice a year. Any associated costs, such as travel and accommodation, are tax-deductible.

If you choose to self-manage your property, you will need to familiarize yourself with tenancy laws and be prepared to organize repairs, including those that may arise outside of regular business hours.

We understand that every borrower has unique circumstances, and some situations may be more complex than others.

With our extensive experience, we know which lenders are willing to work with investment customers who have more complicated needs, and we will negotiate on your behalf.

Appreciate Depreciation

The Australian Taxation Office (ATO) offers a discount on your tax bill for wear and tear on property, which is referred to as depreciation. This can be a significant benefit for investors, especially when purchasing a new property.

The calculation of depreciation can be quite complex and depends on various factors, such as the age of the property, the type of building materials used, and the different fittings. This is where a professional quantity surveyor can be of assistance. For a fee—typically around $600—they will assess your property and complete a Tax Depreciation Schedule. Your accountant will then include this schedule in your tax return.

Taking Ownership

If you need both incomes to be considered in the lending equation, please speak with us to receive the right advice on the best ownership arrangement for your circumstances.