So, you’re thinking of buying an investment property? Investing in property can be a great way to boost your wealth and earn a passive income. It’s also a huge decision that takes time, energy, and money. I can tell you that anyone can buy an investment property but is it the right investment for you?
Property Investment Thinking
So, you’re thinking of buying an investment property? Investing in property can be a great way to boost your wealth and earn a passive income. It’s also a huge decision that takes time, energy, and money. Check out Moneysmart for more information on how property investing works.
Now that you’re thinking about investing, you might be wondering who can invest in property and whether it’s the right investment for you. I can tell you that anyone can buy an investment property. All you need is to meet a few basic criteria.
A better question is whether investing in rentals is a good investment for you?
We can’t give you financial advice because we can’t take into account your unique financial situation. A licensed expert can provide you with advice on the best investment opportunity for you.
What we can do is give you the information you need to understand the opportunity.
To do this, we need to help you understand what you can expect from your investment property and what’s involved in being a landlord.
Buying an investment property is totally different from buying a new home. You should be on the lookout for a good investment.
What Makes a Good Investment Property?
The factors that make a good investment property are low vacancy, great rental appeal, low maintenance costs and growth potential in both income and resale value.
First off, it’s important to note that property prices are currently booming in Perth. Plus the strong demand for good rentals by prospective tenants means vacancy rates are low. This means the potential for some great returns if you ask the right questions and talk to the right people.
Property Investment Factors
There are at least 5 areas you should consider before investing in property:
Tax implications: When thinking of investing in a new rental you will want to talk to your accountant. There are plenty of opportunities to take advantage of tax incentives. But there are also plenty of potential pitfalls that need consideration. Your accountant will guide you on any issues of capital gains and negative gearing.
Capital value: The Perth housing market is currently experiencing strong capital growth. Whether this is a benefit to you will depend on your unique circumstance and how long you own the property. Consult your financial planner to help you understand how the market value is likely to impact your decision.
Affordability: Can you afford a new investment property? To find out talk to your bank manager, mortgage broker and financial advisor about options. Some people grow their rental portfolio by using equity from their home and existing rental portfolio. This enables them to increase their income while balancing their loan risk. Speak to your broker or advisor to see if this is an option for you.
Cash flow: By investing in property, you can build a generous monthly passive income. You will need to consider a few factors. Including the rental appeal, the expected vacancy rate and ongoing expenses. Hiring a property manager is a sensible option to help minimise costs and maximise income. For their service, you pay a small percentage of your rental income.
Time commitment: Being a landlord can be a full-time job. In fact it is for many people. There is a big time commitment. Before you make the decision to invest in a rental you need to determine whether you have the capacity to give it the time required to make it a great investment. Because this will determine whether your investment property yields a positive return. You can hire a property manager to take the hassle out of it. They can do the hands-on work like finding tenants and collecting rent, so that you can all but forget about the property.
Managing Rental Risks
Investing in rental properties has risk. As Benjamin Franklin said ‘nothing is certain except death and taxes.’ Yet, the risks are manageable. As long as we get reliable expert advice, the right help, and use some common sense.
So what should we watch out for? As a cash flow generating investment we want to do everything we can to ensure the cash flow is both positive and consistent. To do this we need rentals which have:
- High appeal to quality, stable tenants
- Low vacancy rates
- Low ongoing and predictable maintenance costs
We want our investment property cash flow to be as boring and predictable as possible. This includes how we finance our investment property, which should be as low and predictable as possible. I’ve seen first hand what happens when a landlord borrows too much to finance their portfolio. Small increases in interest rates can be devastating, taking an emotional and financial toll.
Don’t let this happen to you. See a financial adviser to help you plan a rental portfolio that is appropriate for your financial situation.
Property Investment Takes Time
Remember, it’s a marathon and not a sprint. If you make sensible decisions owning an investment property or two can provide an income that will change your life.
We’ve covered what to consider and who can help you decide whether investing in rental property is right for you. Next we’ll cover what to look out for when searching for great opportunities to buy rental properties. Make sure to check it out.
To recap, before deciding whether rentals are the right investment for you, speak to your: accountant, financial advisor, mortgage broker and a property manager.
Our property managers are standing by to answer any of your questions. Please contact one of our experts for advice.