With real estate prices surging, investing in property has become a profitable and viable proposition. But, you need to look before you leap and the property market can throw up some surprises if you are not well prepared. Have a groundwork in place and plot a plan. Without a blueprint in place, you won’t be able to spot the red flags. Read on to know more about the 7 things to consider while investing in property.
#1 Finding the Right Property With Correct Prices
Decide what property investing means for you. You will never get anywhere if you don’t know what your investment plan means for you. Understand, how much money you need as selecting the right real estate is all about cashing in on capital growth. Hence, it becomes imperative to choose a property that is more likely to increase in value with time.
As opposed to buying shares when share prices are clear, property prices are more opaque. This also provides you with the chance to acquire an asset below its real market value and benefit from the gains. Don’t opt for real estate which cannot be evaluated for its location and true value. Check if the commission you are paying is competitive. You need to get an independent valuation done so that your negotiation skills are put to good use. Lenders and mortgage insurers have important data on different locations and property developments which you should try and access to avoid picking the incorrect investment property.
You can always prevent any future negative implications by making the right choice. Steady rental income is also important because the constant cash flow makes it affordable to hold on to our assets. Always keep a check of the different categories of residential properties available, like apartments, homes, and land to see which one can outperform the other in time. Less maintenance and higher rental yields are ways to investment success in the real estate industry.
#2 Making Repayments: The Crucial Part
When investing in property, you must be aware of the amount that you are capable of borrowing. After all, the faster you make extra repayments on your loans, the faster you can get rid of your debt and pay lesser interest too. This way you will save money in interest payments and take a financial load off your shoulders. So, go ahead and get a loan pre-approved and ensuring that you have set some funds aside for acquisition costs, holding costs and a financial buffer for a rainy day or rising interest rates.
#3 Consult a Pro
A top mortgage broker can be an important resource for investors. They access a wide range of mortgages and property information which can be tapped. Calculating on the basis of financial status, they can guide you regarding the best loan. You can also consult a local property manager who is often a licensed real estate agent. Such pros can give you ongoing advice and create possible value for your property. A good agent can assess when rents should be reviewed and when they should not. Finding the top rent payers and managing your property can become easier if you choose the services of an investment professional.
But do take into account that investing in property is not just about the rent. It also concerns maintaining a cash flow. A property accountant can structure investment properly to maximise cash flow and tax deductions. Structure your investment to minimise tax bills and to protect your investment.
#4 Know Your Limits
Understanding the nature of risk one can handle is critical to making the right choice about investment strategies to be adopted. Assess your risk profile by considering investment income, retirement age, and buffers. Be clear about the various aspects of property investment and consider online resources to get information about investing and the property market in toto. Accessing independent information and analysis can lay the groundwork for a successful investment.
#5 Know the Numbers
You don’t have to be a mathematical genius to crunch new numbers and analyze the deal. Understanding what the numbers stand for and where to get them ensures the ease of grasping concepts that are critical to financing investment property. Interest paid on investment property loans are tax deductible However, Some borrowing costs are not tax deductible. Knowing the difference between these borrowing costs, and structuring the loan correctly is critical to your investment’s success. Whether you opt for fixed rate loan or variable rate loan, consider all options before you make the decision. The home loan rates should be in line with property prices so it does not cancel out your gains. Interest only loans increase tax effectiveness of investment, especially in the case of home loans. You need to factor in variability and flexibility too.
#6 Use Equity
Leveraging equity in your property investment or equity from another home can be a useful way to buy investment property. Equity is the cash you actually own. It is the difference between what property is worth and what is owed on a mortgage. If the home is worth AU$700,000 and you have to pay AU$300,000 as mortgage, the equity amounts to AU$400,000. Using equity from current homes can help you borrow more money for property investments while also increasing tax deductions.
#7 Negative Gearing
This offers property investors tax-free benefits. This holds if investment cost exceeds income produced. The law permits the deduction of borrowing and maintenance cost for properties to form the total income. But tax benefits are only possible if other taxable income is in place. So, ensure you don’t buy a property just for tax deductions even though tax benefits are a common motivation for many real estate investors. Consider the entire value of the property and it’s expected appreciation to derive complete benefits from it.
Conclusion
Buying investment property is all about considering factors like what you want to achieve, your investment strategy, the age and condition of the property you are purchasing, the type of property, whom to approach for professional consultations, and knowing your obligations. It is also about adjusting your investment to suit your means.
When it comes to investing in property, numbers are everything. So, if you are thinking of building a property portfolio, you need to ensure that your finances are set up correctly to support your ambition. Discuss your investment goals with a Mortgage Broker in Melbourne, as they possess a wealth of industry experience. They will be able to do all the research and legwork to obtain the best deal for you, while also taking care of matters related to the bank saving you both time and money.