For many people, buying property is maybe their first experience or if this is not the first time of buying property, some people may still need some tips as buying property will involve a large sums of money, and nobody wants to use it in the wrong way. That is why, below article will provide you with the top three tips for buying an investment property, that is hopefully can help you to have a convenient buying process.
- Choosing the Right Property at the Right Price
Buying in property has a close relation with capital growth that is why choosing the property that will experience the increasing in the future is crucial. However, buying shares where the value can change abruptly is not an easy task. For this purpose, you need to do a proper research, as this will help you know what a property is worth in one area and you could do a bargain. Moreover, do not buy property from an area that you do not familiar with.
To get more valuable data on different locations and property developments you can contact some lenders and mortgage insurers in order to avoid you selecting the wrong property investment. Furthermore, never make a decision to purchase an investment property because of a tax deduction.
- Do your sums-Cash Flow is always King!
Everybody may agree that property investment can produce wealth. However, buy a property is not about the ability in purchasing it, but how to manage the money, so you will know when to sell your investment property at the right time. Moreover, because of rent earning and a tax deduction of the property owning, once you have a property, it can be quite reasonable to keep it and service the loan. Furthermore, over time rents tend to increase as does your own income.
For having a close predictions of what it might cost you to own an investment property. For your information, it will be better, if you look at cost of servicing the loan on an after tax basis, so you can get a real predictions of the cost.
Purchase Price of Property: $500,000 Stamp Duty and other costs: $20,000 Amount Borrowed: $520,000 Rental Income Received: $450 per week
Ongoing Costs Interest Cost @ 5.00% p.a: $26,000 Rates: $1,500 Land Tax: $804.00 (Calculate your land tax in NSW ) Agents Fee @ 7%: $1,638 Insurance: $500
Total Costs: $30,422 Less Rent: $23,400 ($450 per week x 52) Annual Shortfall: $7,022 Less tax deduction: $3,160 (assuming a tax rate of 45%) Annual after Tax cost: $3,862 or the equivalent of $74.26 each week
For a note, this example your cost of holding this investment property works out at only $75 per week.
- Understand the market and the dynamics where you are buying
Find out if there are other options available in the immediate area and get as many information as you can from locals and real estate agents. Hopefully, they can tell you an area with a good price property. Furthermore, it is a good trick to get inside information. Accessing independent information from a source such as RP data can give you information on average rents, property values, demographics and suburb reports.