Property is one of the most popular forms of investment in Australia especially after the GFC crisis where people are too scared to look at the share market. If you are considering a property investment, here are a few points to start off your research.
Consider the initial costs
The two main initial costs in buying any property include stamp duty and legal/conveyancing fees. Stamp duty can be a massive chunk which many people just do not consider. This is a capital cost which is added to the base price of the property. There are some incentives for first home buyers to avoid stamp duty (or at least concessions on stamp duty).
Many people are now utilising this by living in their home for the minimum required period and then using the property as an investment. The second consideration is the legal and conveyancing fees although these can be deductible if the property is being used as an investment.
Consider the ongoing costs
If you are considering an investment property you need to factor in more than just the property costs. Insurance is a big factor not only for items such as carpeting, appliances, curtains and so forth, but also for liability purposes. Rates are normally paid for by the home owner, along with any strata fees or body corporate costs.
You also need to make sure you have enough spare cash to cover any repairs that may occur. Recently the toilet in our home blocked and because it was a public holiday the cost of a plumber was up towards $1000. Repairs and maintenance are usually tax deductible but you still need the cash to cover it.
Is there guaranteed rental income?
Location is probably one of the biggest factors as to whether you will gain regular rental income. Look at property markets and demands. For instance my friends have been searching for an apartment to rent in the lower north shore area-some places had up to 40 applicants. But this is not occurring everywhere.
Generally renters will be looking for access to public transport, schools, hospitals and shops. Keep in mind that the property you buy is for investment not for you to live in, so it does not need to meet your own criteria of where you want to live.
For more information on guaranteed rental income, check out our article on Defence Housing Australia.
There are many tax benefits that come with owning an investment property. Negative gearing is where the rental income does not cover the expenses and in turn can be considered a loss on your yearly income, thus reducing tax. If you are going to embark on buying a property engage the services of an accountant who can help explain all the different factors involved and what this may mean to you.
Investment in property can be a good way to build up your investment portfolio and can offer you many advantages in tax breaks. Make sure before you embark on it that you do your research on location, costs, liabilities and home loan options.