The average mortgage size in Australia is around $600,000. If your investment property grows at 6% per annum, that means it will double in value in 12 years. Therefore, a $800,000 investment property will be worth around $1,600,000 in 12 years’ time, and your capital gain is $800,000. If you then sold the investment property, after capital gains tax and selling costs, your profit would be approximately $600,000 and you could pay off your own home in full.
There are also advanced strategies our Accounting Experts can assist you with.
Interest rates are at historically low levels. You can take out the biggest variable cost with property investing by fixing your loan to provide certainty with your cash flow. Your finance broker or lender will be able to provide you with the benefits and costs of fixing interest rates.
Besides fixing your loan, rents generally increase over time. The increase in rent over time generally more than offsets the cost of any future interest rate rise.
Technically yes, however the goal is to build a property portfolio that will give you the best capital growth and cashflow over time so you can achieve your goals. You need to be clear what you want to achieve before buying an investment property. The best investment property is not usually the same property you’d live in down the track. By investing well, your chances of being in a financial position to buy a property that you’d like to move into in the future is much higher.
Generally, it takes between 0-4 weeks for a property to be rented out after completion, depending on the supply and demand in the area. Having an excellent property manager is crucial – we put you in touch with the best property managers who will help you find the right tenant quickly. Property supply is in massive shortage in most major cities in Australia.
The two main reasons investors don’t find a tenant quickly is: over-supply in the area; and/or, the price is too high. Be pro-active and adjust the rent until you find the market price. It is better to have a property tenanted for a few dollars per week less, than to hold off for an extra few weeks in hope of getting a little more per week.
Make sure you have a buffer of extra cash reserves or additional funds available in a loan facility before investing. This way, if you lose your job, you’re not forced to sell your property. Income protection, trauma and life insurance are highly recommended. We can refer you to a specialist in this area if needed.
If you don’t know the answer to the following question, then you’re in the majority and probably about to make an expensive mistake: “How long can a building be depreciated for?” Most people answer “seven” or “ten years”, but they’re wrong and are effectively buying ‘blind’. The correct answer is 40 years.
Typically an existing property will cost the average investor around $25,000 per year plus any unexpected maintenance costs. Full stamp duty is also payable on an existing property, which means the property will need to grow by around 5% just to break even. $25,000 per year limits investors to a portfolio of usually one investment property, as they cannot afford multiple properties at $25,000 per year. Statistically over 40 per cent of investors will sell within five years and most of them will break even or make a loss.
The main advantage of buying new property is the cashflow – typically costing less than $100 per week. With the depreciation of the building, fixtures and fittings and low maintenance costs, a typical new property is easy to duplicate. Building and structural warranties, as well as stamp duty savings are among many reasons why new properties are a superior investment compared with existing properties.
