There are a couple of traps we can all fall into when looking to buy an investment property for the first time if you don’t consider a few tips in the beginning.
1. This is an investment property, not somewhere where you will be living, so take emotion out of the decision and stick to the facts.
2. Decide the purpose of the investment. Real estate should be considered as a long term investment, at least 5 years, it is not a get rich quick scheme unless you simply get lucky with a radical upward swing in the market.
3. Discuss with your financial adviser or accountant whether you should structure your finances for negative, neutral or positive gearing.
4. Are you using cash as a deposit or leveraging against an existing property you already own? Make sure you also discuss this with your accountant first.
5. Arrange your finance prior to looking at property and do your sums based on how much you will need to subsidise the mortgage over and above the net income.
6. You will need tenants on a regular basis so choose an area where there is high employment and good transport hubs. Regional areas for this reason may be cheaper, but tenants harder to find who are gainfully employed.
7. Some investors stick to certain locality rules to ensure low vacancy rates, for example: the property must be close to hospitals, university and train/bus access.
8. Depending on where you decide to buy consider the advantages of new property versus established. If you need greater tax benefits then new may be better.
9. Always seek advice on whether a depreciation schedule may prove beneficial to your tax benefits. Some renovated, established properties may also benefit from a depreciation schedule.
10. Remember, when it comes to real estate, everyone’s an expert. Only take advice from professionals or those who already own multiple investment properties!
by Greg Rogers in Buying
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