Property Investment Tips

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Property Investment Tips.

National Investment Planning first property investment tip is when your rental tenancy agreement expires, it’s a great opportunity to increase the rent and improve your cash flow. But is it always wise to increase rents? – and by how much? More information can be found in our information pack here

“Wealth building through property isn’t an overnight or get rich quick scheme. It’s NOT instantaneous, but with the right factors in place, a base of wealth can be built at quite a rapid pace.

Once a property has been purchased, your involvement can be reduced to a minimum through the use of an effective property manager.

Don’t be afraid of getting advice, but make sure it’s good advice.

National Investment Planning has a panel of advisors for legal, financial planning, accountancy and property selection. Having a support team who are active property investors themselves allows a more balanced and objective view on property investing.

Don’t be afraid to purchase when the market is either up or down.

Investors should take a long-term view as investment in residential property is not a get rich quick scheme.

It’s important to remember that not all landlord protection policies are the same.

Some, for instance, are designed to be taken out in addition to a typical home and contents or strata title policy, while others are more comprehensive.

Some policies allow you to take out cover for the contents of the property. This is particularly important if you rent out a partially or fully furnished property.

Property management fees.

If you have a property manager looking after your property, you should receive regular income/expense statements from them. Statements are normally sent every month with an annual statement sent at the end of the financial year.

Be sure to claim all their costs, such as management fees, postage, stationary, letting expenses, lease renewal expenses and inspection charges.

You will find that if you have a good property manager taking care of your property, all of their charges will total approximately 10 per cent of your rent.

Travel and car expenses – keep good records.

Any use of your car, whether it be for the collection of rent, inspection of property and/or maintenance of the property should be recorded.

Repairs and maintenance.

There is one thing that you need to be very clear about … and that is the difference between a repair and an improvement.

One can be fully claimed in the year that the expense was incurred, the other cannot.

Stationery and postage.

If you communicate with your tenant via mail, be sure to claim the cost of stamps, envelopes, registered mail, etc. Be sure to keep all receipts.

Remember, it’s important to consult your accountant regarding expenses to confirm if they are claimable or not.

Quality record management is of the utmost importance and can be broken down into three distinct areas: income, expenses and depreciation.

Income.

A good property manager will provide a concise summary of rental payments received over the last financial year.

Investors should ensure all rental payments have been accounted for and that rental income amounts correspond with bank statements.

Expenses.

Expenses often involve a wide variety of items. A detailed list should be included as part of an investment property claim. It is important to ensure all claimable expenses are included as part of the end of year assessment on the property in order to obtain the maximum allowable tax benefit.

Depreciation.

Depreciation refers to normal ‘wear and tear’ to the asset, capital works and other depreciable items such as fixtures, fittings and appliances.

The depreciation schedule is one of the most important documents relating to an investment property. For investors it is advisable to engage a quantity surveyor before the property is leased, in order to have a complete and accurate depreciation schedule in place.

How much can you comfortably afford to spend on an investment property?

Income, lifestyle, available deposit and your borrowing capacity are all things that you need to consider. It’s important to factor in all of your purchase costs.

These can include loan establishment fees, valuation fees, conveyancing, stamp duty and insurances.

  • Rather than getting one big tax return at the end of the financial year, consider applying for a 15-15 Variation so that you have less tax taken out of each pay packet throughout the year. With negatively-geared properties this can improve cash flow.
  • Choose a property that will have the highest potential for capital growth and allow time for compounding to happen. More often than not it’s the waiting that is the hardest part.
  • Remember, the property cycle is on average 7-10 years and the savy investor knows that the most opportune time to invest is during a lull, not during a boom when prices are at a premium.

Disclaimer: Please note that the above information is a guide only. We always recommend that you speak to your accountant regarding expenses, taxation and your individual circumstances.

How do I get started?

Contact us on 1300 545 899 for a free information pack, or to arrange an obligation free consultation.

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