Build Wealth by Investing in Property

By You and money

Property 1

Investing in property to build your wealth makes sense. Property can be a solid investment that can offer you regular rental income, capital growth and tax benefits. Remember that property is a long term investment and you should be willing to keep it for at least 10 years.

Here are some tips for anyone considering property investment.

Plan well

  • Work out how much you can afford to spend and as well as how much you’re able to borrow. It’s worth getting a loan pre-approval before you go further
  • Be aware of the risks involved in renting – there could be a rise in interest rates, no tenants or a drop in property prices

Your strategy – capital growth vs higher rental

  • Property investment can give you two types of financial returns – capital growth (growth in the value of your property) and rental income.
  • Generally properties in regional areas provide a higher rental return however may not attract as much capital growth over time.

Budget for the extras

  • Be aware of all the costs involved in buying and managing an investment property. Think about building inspections, stamp duty, borrowing costs, legal/conveyancing fees, real estate fees, insurance, body corporate fees, council rates, water rates and land tax.

Choose the right property

  • What and where you buy plays a big part in how successful your investment in property ends up.  Find out as much as possible about the areas you are interested in buying in.
  • Tenants generally prefer locations close to public transport, shopping, cafes, parks and schools.

Get the right loan

You need to find a loan with competitive rates and the flexibility you need to manage your investment.

Choose from:

  • Loans with either fixed or variable interest rates
  • Interest only loans which you don’t pay anything off the loan amount itself, you just pay interest
  • Line of Credit which allows you to draw on the equity you have in that property

Tax considerations

There are a few things about owning an investment property that will impact on the tax you pay.

  • Negative Gearing – when the cost of owning your property is more than the money you receive in rent which could lead to possible deductions on the amount of tax you pay
  • Tax Deductions – apply for certain expenses relating to your rental property
  • Capital Gains Tax – a tax you must pay on the ‘profit’ you make when you sell your investment property

It’s worth getting professional advice on any tax considerations.

Manage it well

  • Managing your investment property involves finding tenants, collecting rent and arranging for maintenance and repairs
  • Most people decide to use a real estate agent to manage their investment property

 

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