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New Step Finance

Investing in Property: Research and the Right Team

But where to start? We can help you weigh it all up.

Investing in property is a significant decision that requires careful consideration and thorough research. When it comes to property investment, having the right people to assist you can make all the difference. From real estate agents to financial advisors, the expertise and insights of professionals are invaluable. Proper research is crucial to understand market trends, property values, and the long-term potential of your investment.

The Importance of Thorough Research

Research is a critical component of successful property investment. It involves analyzing market trends, understanding the local area, and evaluating the potential return on investment. By investing in property after conducting comprehensive research, you minimize risks and increase your chances of achieving your financial goals. This means looking at factors such as property prices, rental yields, and the economic outlook of the area where you plan to invest. Knowing these details helps you make an informed decision that aligns with your investment strategy.

Building the Right Team of Experts

Furthermore, the right team of experts can provide guidance on various aspects of property investment. Real estate agents can offer insights into the best locations and property types, while financial advisors can help you understand the financial implications and secure the necessary funding. Legal professionals ensure that all transactions comply with regulations, protecting your interests throughout the process. Additionally, property managers can help you manage your investment efficiently, ensuring it remains profitable in the long term.

Staying Informed and Adapting to Market Changes

In addition to research and having the right team, it is also essential to stay informed about changes in the property market. Market conditions can change rapidly, and being aware of these changes can help you adapt your strategy accordingly. Attending property investment seminars, reading industry publications, and networking with other investors are great ways to stay updated on market trends and new opportunities.

Conclusion: Achieving Long-Term Success in Property Investment

In conclusion, investing in property is not just about purchasing real estate; it’s about making informed decisions supported by research and the expertise of a reliable team. By prioritizing these elements, you can navigate the complexities of property investment and achieve long-term success. Investing in property can be a rewarding endeavor, but it requires dedication, knowledge, and the support of professionals who understand the market. By taking these steps, you can build a profitable property portfolio that meets your financial objectives.

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VIC 3978
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Here are some tips to help you find the right rental and reap the most rewards.

Unit or house?

House prices often increase in bigger strides than units, offering more potential for capital gain over time. But a rental home also comes with added responsibilities, including gardens and lawns (and sometimes a pool) to maintain.

A unit or townhouse may not increase in value as quickly, but they are generally easier to maintain and may even be easier to rent for that very reason, depending on location, condition, and size.

Location, location

Of course, you’ve heard this before. But location can mean different things when it comes to rental properties. Renters are often looking for maximum convenience so consider properties near schools, major shopping centers, and public transport. Spend plenty of time researching target areas, including recent property price movements and future predictions, rental vacancy rates, and any proposed infrastructure improvements. You should also do some scouting as if you were a renter to get a first-hand look at the local market.

Remove the emotion

One of the worst mistakes you can make with any investment is to buy with your heart instead of your head. Remember, your rental property is not your ‘home sweet home’. A well-presented property is desirable, but think sensible, not swank. Ideally, you want a neutral interior color scheme, serviceable and resilient flooring and window coverings, a low-maintenance yard, and good storage. And if buying an older-style unit, look for one with an internal laundry, a garage or car space, and few stairs (unless there’s a great view to be had higher up, which can add to the property value).

Don’t forget the extras

An investment property requires regular financial commitment beyond the loan repayments. Make sure you have the capacity to cover land and water rates and any maintenance and repair costs. Tenants are entitled to repairs or replacements as quickly as possible under their rental agreement, so you will need to have the means to pay. Apartments or units also come with body corporate fees, which can run to thousands in some modern complexes with professional landscaping and shared amenities, such as swimming pools.

Cover your investment

Make sure you take out landlord’s insurance. This will cover you for damage caused by a tenant and unpaid rent if a tenant skips out, in addition to other standard risks, such as a house fire or a storm. If you invest in a strata title property, make sure the body corporate has sufficient building insurance to cover the cost of rebuilding the complex in today’s prices. It’s often hard to work out what you need to cover versus what the body corporate covers. A good rule of thumb is everything from the wall paint inward is yours and everything outside of that is covered by the body corporate.

Any interest?

Many property investors take advantage of interest-only loans because interest payments are tax-deductible. That means you’re taking a punt that the property’s value will increase over time, leaving you with a financial gain in the long run. This is a good strategy for high-income earners who are taking advantage of negative gearing. If you choose to positively gear your investment (i.e., generate a profit from the rental income after costs), you might want to consider a principal and interest loan and use the profit to shave off the principal. Just remember, you will pay tax on any income from your investment. Talk to your accountant about your tax situation so your broker can find the right loan.

Manage your investment

Managing a property takes time and energy. If you don’t have much to spare of either, you should get a professional property manager to advertise the rental, screen and select tenants, collect and pay the rent, coordinate repairs and maintenance, provide condition reports, and manage any disputes. Ask other local landlords for referrals for reputable managers. You should also conduct twice-yearly inspections yourself. Any associated costs, including travel and accommodation, are tax-deductible.

If you decide to self-manage, you will need to be well-versed on tenancy laws and prepared to organize repairs, including those that arise after hours.

We understand every borrower has unique circumstances – and that some are more complex than others. We know from vast experience which lenders will work with investment customers who have more complicated requirements and will negotiate on your behalf.

Appreciate depreciation

The ATO will give you a discount off your tax bill for wear and tear on the property. It’s known as depreciation and can be a very handy windfall for investors, especially if you buy a new property. The formula is quite complex and depends on the age of your property, building materials, and the various fittings. That’s where a professional quantity surveyor comes in. For a fee (often around $600), they’ll assess the property and complete a Tax Depreciation Schedule, which your accountant will incorporate into your tax return.

Taking ownership

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

A general list of investing FAQ

Why invest in property?

Australians are among the most active property investors in the world, with an average of one in every three new mortgages each month arranged for investors. Most of these investors are ordinary people with ordinary jobs earning ordinary incomes. So, why is property investment so popular?

Capital growth: Capital growth is the increase in value of property over time, and the long-term average growth rate for Australian residential property is about 9% a year. Importantly, because property markets move in cycles, property values go through periods of stagnation as well as decline. This is why taking an investment view of at least 10 years is important. Note: if your investment property increases by 7.5% a year, over a 10-year period, it will double in value.

Rental income: Rental income, also known as yield, is the rent an investment property generates. You can calculate this by dividing the annual rent by the price paid for the property and multiplying it by 100 to produce a percentage figure. As a general rule, more expensive properties generate lower yields than more moderately priced properties. There is also usually a direct, inverse relationship between capital growth and rental income. Properties producing a lower rental yield will often deliver greater capital growth over the long term.

Tax benefits: The Federal Government allows you to offset against your taxable income any losses you incur from owning an investment property. For example, if the amount you receive in rent from tenants is $5,000 less than the cost of servicing the mortgage, and paying rates, water, and other fees associated with the property, at the end of the year you can add that $5,000 to the amount of income on which you don’t have to pay tax. If you work as an employee, with income tax automatically deducted from your pay, this means you’ll receive a refund from the Australian Taxation Office (ATO) after the end of the financial year.

Low volatility: Property values generally fluctuate less than the stock market. Many investors say they experience greater peace of mind for this reason.

Leverage: Property enables far greater leverage than many other investments. For example, if you have $100,000 in savings, you could invest it in a portfolio of shares, or use it to buy a property worth $500,000 by taking out a mortgage for $400,000. If shares go up by 10% during the year, your share portfolio would be worth $110,000 and you would have gained $10,000. If property goes up by 10% during that same year, your property would be worth $550,000 and you would have gained $50,000.

You don’t need a big salary to invest: If you are buying to invest, lenders will take rental income as well as your own income into their assessment. If you already own your own home and have some equity in it, you may be able to use this as a deposit, meaning that you can buy an investment property without having to find any additional cash. If you don’t own your own home and feel you may never be able to afford one, buying an investment property may be a good stepping stone to one day being able to afford your own home.

How much money can I borrow?

We’re all unique when it comes to our finances and borrowing needs. Get an estimate on how much you could borrow with our Home Loan Quote in 30 seconds. Or contact us today, we can help with calculations based on your circumstances.

How do I choose the loan that’s right for me?

Our guides to loan types and features will help you learn about the main options available. There are hundreds of different home loans available, so talk to us today.

How much do I need for a deposit?

Usually between 5% – 10% of the value of a property. Speak with us to discuss your options for a deposit. You may be able to borrow against the equity in your existing home or investment property.

How much will regular repayments be?

Go to our Repayment Calculator for an estimate. Because there are so many different loan products, some with lower introductory rates, talk to us today about the deals currently available, and we’ll find the right loan set-up for you.

How often do I make home loan repayments — weekly, fortnightly, or monthly?

Most lenders offer flexible repayment options to suit your pay cycle. If you aim for weekly or fortnightly repayments, instead of monthly, you will make more payments in a year, which can potentially shave dollars and time off your loan.

What fees/costs should I budget for?

There are a number of fees involved when buying a property. To avoid any surprises, the list below sets out all of the usual costs:

  • Stamp Duty — This is the big one. All other costs are relatively small by comparison. Stamp duty rates vary between state and territory governments and also depend on the value of the property you buy. You may also have to pay stamp duty on the mortgage itself. To find out your total Stamp Duty charge, visit our Stamp Duty Calculator.
  • Legal/conveyancing fees — Generally around $1,000 – $1500, these fees cover all the legal rigors around your property purchase, including title searches.
  • Building inspection — This should be carried out by a qualified expert, such as a structural engineer before you purchase the property. Your Contract of Sale should be subject to the building inspection, so if there are any structural problems you have the option to withdraw from the purchase without any significant financial penalties. A building inspection and report can cost up to $1,000, depending on the size of the property. Your conveyancer will usually arrange this inspection, and you will usually pay for it as part of their total invoice at settlement (in addition to the conveyancing fees).
  • Pest inspection — Also to be carried out before purchase to ensure the property is free of problems, such as white ants. Your Contract of Sale should be subject to the pest inspection, so if any unwanted crawlies are found you may have the option to withdraw from the purchase without any significant financial penalties. Allow up to $500 depending on the size of the property. Your real estate agent or conveyancer may arrange this inspection, and you will usually pay for it as part of their total invoice at settlement (in addition to the conveyancing fees).
  • Lender costs — Most lenders charge establishment fees to help cover the costs of their own valuation as well as administration fees. We will let you know what your lender charges but allow about $600 to $800.
  • Moving costs — Don’t forget to factor in the cost of a removalist if you plan on using one.
  • Mortgage Insurance costs — If you borrow more than 80% of the purchase price of the property, you’ll also need to pay Lender Mortgage Insurance. You may also choose to take out Mortgage Protection Insurance.
  • Ongoing costs — If you buy a strata title, regular strata fees are payable. You will need to include council and water rates along with regular loan repayments. It is important to also take out building insurance and contents insurance. Your lender will probably require a minimum sum insured for the building to cover the loan, but make sure you actually take out enough building insurance to cover what it would cost if you had to rebuild. Likewise, make sure you have enough contents cover should you need to replace everything if the worst happens.
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