Investing In Real Estate

Congratulations on making your latest step into the Australian property market.

With any investment comes certain responsibilities that you need to attend to from time to time and decisions that you need to make over the years.

Now that you have successfully decided on the best location for your property, successfully navigated negotiating a great purchase price and the property has settled.  It is now time to look at what happens next and discuss some points that are worth considering so that you get the most out of your property.

So You Have Invested In Real Estate - Now What!

Don't Lose Sight Of Your Why

This is probably the most critical point that I want to make. Because without a solid reason why, it is very hard to make decisions for the long term and you may be tempted to exit at the first sign of adversity or even good fortune for that matter.

• Is your goal a renovation and flip over the next 24mths?

• Are you subdividing and looking to develop the land?

• Is your goal a long-term hold for a passive income stream later on?

There are a million things that you can do with real estate however there are usually minimal options for any given property. Likewise, there are a million things that people are capable of achieving however there is usually a finite amount of experience and funds that any individual has available.

That is why it is so important to run your own race and lead with your strengths. If you don’t have a clear desired outcome and timeframe, it may be something to consider thinking about.

Understand Your Cash Flow

Interest rates go up and down over time, personal income changes and your circumstances will change in the lifetime of your property, especially if you are looking at a long-term investment of over 10 years or more.

That is why it is important that you speak with your Mortgage Broker or lender to understand what impact changes in rates will mean to your personal cashflow over the years.

Speak with your accountant to see what options may be available to you to improve your cashflow position. There may be options to take advantage of depreciation throughout the year.

Not only does this make good business sense it is also the perfect anxiety relief when the media inevitably start talking doom and gloom.

Engage A Quantity Surveyor

A Quantity Surveyor will provide you with a tax depreciation schedule for your property. This is used by your Accountant to off-set your income against wear and tear on the property over time.

Your tax depreciation report will be determined by a number of factors such as the age and type of property.

Engage An Accountant

The Australian Tax Office (ATO) has had a significant improvement in their ability to detect mistakes and enforce their ever-changing tax laws over the past 20 years. For that reason, I would encourage you to have a conversation with an Accountant so that you have the peace of mind your tax is managed correctly.

Find out what rental investment property deductions relate to you and which ones do not:

• Property Management

• Rates

• Administration

• Insurance

• Maintenance Expenses (Maintenance vs Improvement)

• Depreciation

• Interest

• Seminars

• Borrowing Expenses

Engage A Property Manager

The property market and relating legislation are forever changing and for that reason a Property Manager can be a key part of your team. Invest the time to build a relationship with your Property Managing company and staff because they are the eyes and ears of your investment property.

Why engage a Property Manager:

• Compliance

• Minimise vacancy

• Tenant Management

• Inspections

• Maintenance

Work On Building A Cash Buffer Over Time

Your investment property is not indestructible, and it behoves you to prepare for maintenance needs from time to time even for a brand-new property.

There are a few different opinions on how much you should have on stand by for maintenance. From 1% of the value of the property, to 50% of the rental return and 1.5 x the gross monthly rent. They all give very different results and they do not consider the age or structural state of your property.

For this reason, it is hard to give an exact amount so use your own judgement but keep at least a few thousand dollars in your buffer account and build from there.

A well-managed maintenance plan can:

• Keep the property attractive to tenants and maximise rental returns.

• Maintain a high property value and maximise value for sale or refinance.

• Prevent current issues from worsening and costing more money.

From the whole team here at Astute Property Network, we wish you all the very best with your journey and if you do find your self needing some help, we welcome your call.