Here are our top tips for new and experienced property investors, our Successful Property Investor’s Checklist for Australian property investment advice. These 7 tips will give you a guide to the important considerations for your own property investment firm.
1. Find Your Point of Difference
Location is one of the major driving forces behind finding the right tenant for your property as well as generating capital growth (return on investment). It is important to find the right property that is close to population growth, infrastructure growth and employment growth.
Your point of difference could be small factors that can make a substantial difference such as floor plate layouts, size, ground floor or higher floor, views, or larger factors such as which direction the particular property faces, what is due to be constructed nearby, proximity to schools, cafes, shopping centres and much more. It is important that your property has a particular point of difference to ensure that you continue to secure the right long-term tenant as well as generating strong capital growth.
2. Buying New Over Old Properties
New residential properties in Australia offer substantial benefits over older properties, particularly for our clients who are typically busy professionals who do not want to have to worry about care and maintenance of their investment properties. New properties in Australia also carry substantial tax benefits when structured correctly. This includes being able to depreciate both the building costs and fittings, providing tax benefits that you can carry forward.
New properties also typically provide benefits of including builder’s warranties, requiring less maintenance and will typically attract better quality tenants.
3. Understand What Tenants in the Area Really Want
As a property investor you should remember that not all tenants in all areas have the same requirements for where they live and the type of property in which they wish to reside. For example, renters in regional towns are more likely to require a larger house with land, whereas somewhere 3 – 5kms from the CBD is far more likely to require a brand new apartment or townhouse.
There are of course some commonalities between what tenants require including; proximity to key services and amenities, security, low care and maintenance, proximity to transport and other key aspects.
4. Structure Your Finance Correctly
Whether it’s your first investment property loan or even refinancing of an existing loan, the decision you make about how to structure your financing can make the difference of the same property costing you $500 per week compared to $30 per week. Firstly, it’s important to recognise the benefits of deductible debt compared to non-deductible debt. Secondly, a key decision is whether to structure your loan as interest-only or principal and interest, which can make a substantial difference in how you build you property portfolio.
5. Be Clear on Your Cash Flow
Far too many investors jump into the world of property investment without properly analysing the figures and their implications. We work with our clients to fully analyse in great detail all of the costs of the acquisition of the property, as well as the ongoing costs of ownership of the property. This mitigates the risk and ensures that we can avoid as many surprises in future as possible.
It is also important to monitor your cash flows over time. As a non-resident of Australia, any positive cash flow from your property will be taxed at non-resident tax rates which currently start at 32.5% (Source: www.ato.gov.au) from the first dollar you earn, up to A$80,000.
6. Find a Great Property Manager and Let Them Work for You
Many first-time investors think that they can manage their own properties, failing to recognise the value of their own time, or choose a property manager on the basis of lower charges, ignoring the fact that you will typically get what you pay for. In selecting the right property manager it’s important to analyse their experience in the area, the types of properties they typically manage and types of tenants, communication style, reporting frequency, track record and of course their fees. As you build your property portfolio, you may very well have multiple property managers across suburbs and states which can add further value to your investments.
7. Diversify Your Property Portfolio
Diversifying your property investment portfolio is a strategy that allows you to reduce risk associated with the one market. Australia is a vast continent, with each state being driven by different economic variables, which creates opportunities for us as investors to enter into markets at the right times. Diversification is not just across states, but also in dwelling types, tenant types, locations and size.
By diversifying your property portfolio across states, this will also give you the added benefit of reducing your land tax liability, which is a state-based tax. Each state carries a tax-free threshold and by diversifying your portfolio, we can ensure to minimise or eliminate this liability. It’s important to recognise that this should not be the key driving factor in determining where you invest, but rather an added benefit.
To Your Property Investing Success!
Book your complimentary appointment with Wise Guru to discuss how we can assist you on your property investment journey.
Related Tag: Real Estate in Australia