Property Investing Basics
The following points outline the most important factors to be taken into consideration by property investors when purchasing investment properties. By utilising these essential tips you will avoid the most common pitfalls associated with buying a rental property and will be ensured that the property buying experience will be an exciting and stress free process!
TAKE THE TIME TO EDUCATE YOURSELF
Education is the first essential step you need to take before you can become a successful property
investor. Before you even begin to look at purchasing an investment property it is highly
recommended that you spend a reasonable amount of time familiarising yourself with real estate
terminology, the buying process and the different investment strategies available. Read as many
property investment books and magazines, surf the web for information, register for FREE to gain
access the Property In Focus resource centre, attend property investment seminars and talk to and
associate with other successful property investors.
ESTABLISH AN INVESTMENT STRATEGY THAT BEST SUITS YOUR NEEDS
It is essential that you establish a clear and concise investment strategy before you purchase your
first investment property. What result do you want to achieve? Do you want to invest in negatively
geared properties or positively geared properties? Negatively geared properties (where the income
generated by the property is less than the holding costs of the property) will often have more potential
for capital growth while the "loss" incurred through holding the property can offer you tax benefits to
offset your other income. On the other hand positively geared properties (where the income generated
by the property exceeds the costs involved in holding that property) usually have less potential for
capital growth, however, will provide you with surplus income, which will be subjected to tax. These
choices will dictate what type of properties you buy, the age of the properties, the price of the
properties and the areas where they are located.
Seeking advice from a good accountant or financial advisor (who understands your financial position)
may help you in identifying the best strategy for your situation.
CHOOSE THE RIGHT REAL ESTATE AGENT
Before commencing the house hunt, find a real estate agent who is ethical, courteous, professional and
who will listen and acknowledge your requirements. Even though real estate agents are paid by the
property seller, it is no excuse for them to treat property buyers in a disrespectful manner. Choosing a
real estate agent who is genuinely interested in helping you find the right property will make all the
difference throughout the property buying experience.
DO YOUR RESEARCH
Whether you are a first time property investor or a seasoned property investor, it is essential that you
obtain comprehensive property data and statistics for analysis before purchasing your next property. A
FREE Property In Focus suburb profile can provide you with past sales history, suburb growth, average
prices and many more essential statistics in the area of your choice to help you make an informed
decision when the time comes to make an offer on a suitable property.
AVOID LOSING A PROPERTY TO ANOTHER PROPERTY BUYER
Be aware that you haven't legally entered into a contract of sale until both the property seller and your
self have fully signed a legally binding contract. By verbally submitting an offer you run the risk of
losing the property to another buyer who has made a better offer in the form of a written contract.
Always submit offers in the form of a contract of sale and you will greatly reduce the risk of losing the i
deal investment property.
REMOVE ANY EMOTIONS WHEN MAKING AN OFFER
The first thing to remember when looking at potential investment properties is that you will not be
living in this property. So even if the colours or layout of the property don't match your personal taste,
make your decision based on the requirements outlined in your investment strategy. Investing of any
kind is a numbers game. If the facts and figures "add up" and meet all your requirements then it
should be a simple case of setting a maximum amount that you would be willing to purchase the
property for and submit a formal offer. Remember, once you have submitted and offer, the key to a
successful purchase is to keep a cool head through the negotiations and stick to your budget. Under
no circumstances should you let your emotions take over and become involved in a "bidding war".
OBTAIN INDEPENDENT LEGAL ADVICE AND PROPERTY INSPECTIONS
For most people, purchasing a property is the biggest financial decision that they will ever make. It's
therefore essential for your own peace of mind that you seek the services of independent building and
pest inspectors as well as obtain legal advice from your solicitor or property conveyancer. Ensure that
the property is in sound structural condition before proceeding with the purchase and if you are in
doubt about the price, you may consider obtaining an independent valuation by a qualified property
valuer. By seeking independent advice, you could be saving yourself from possible financial heartache.
WHEN IS THE RIGHT TIME TO BUY?
There is no right or wrong time to purchase a property. The right time to purchase a property is when
you find the right property at the right price. This could happen within the first week of searching or
possibly after months of painstaking effort. Don't make any rushed choices but when you do find the
right property be clear and concise with your decision and submit an offer accordingly.
MAXIMISE THE TAX BENEFITS
Now that you have successfully purchased an investment property, it is recommended that you seek out the services of a qualified accountant who specialises in property investing. They can save you thousands of dollars every year by maximising the potential tax benefits available to you.
You should also look at employing the services of a certified quantity surveyor. A quantity surveyor will inspect your investment property and will prepare a depreciation schedule, which can also be used to maximise tax savings on your investment property. A depreciation schedule outlines the rate of depreciation that you can claim on the building, fixtures and fitting of your investment property. This rate of depreciation is then used to offset your taxable income.
For more information on maximising your property related tax benefits, visit the Property Tax Benefits section of this website.
For more valuable real estate tips, register for FREE to gain access to our comprehensive property resource centre.
