Investment properties have long been a tightly-kept secret for increasing one’s wealth. Now investing in property has become almost a normality, with many opting to buy a property and use it as security for another loan or just as a rental property. While an investment property may seem like a fast-track to big bucks, it’s important to be fully informed of all the financial risks associated with purchasing a property for investment purposes. In other words, it’s important to know you’re really getting the best investment and the best investment loans.
Don’t just buy any Property
The whole point about an investment property is its capital growth. If you’re looking at a particular property to purchase, be sure to think about whether it is likely to increase in value. This is one of the most important parts of the buying process, so be sure to do your market research on its location and surrounding suburbs. This research data is often made available by lenders and mortgage insurers, so try to access this information to better help you make a knowledgeable decision. Don’t let the tax deductions be the only reason you make the purchase.
Get the Right Type of Home Loan
Everyone’s investment property needs are different, and as such there is a wide variety of home loan products available. A good home loan structure is critical for ensuring your property keeps you in the green. Separate your home loan and investment property loan to ensure you maximise your tax benefits. It’s been found that interest-only loans are more suited for investors as these increase taxation benefits that can be claimed each year. It’s always best to talk to an experienced lender or mortgage broker for more in-depth information regarding different home loan options and which will provide best results for your needs.
Look into Negative Gearing
While considering an investment property, it’s best to look at all your options. Negative gearing has become increasingly popular with investors as it comes with certain tax benefits (if your property costs and expenses exceed the income you gain). This can be incredibly useful for those who earn other taxable income, however it is unadvisable to invest in property just for the taxation payoffs. Always talk to an accountant, mortgage broker or financial institution before making any decisions.
Make the Property Attractive for Potential Tenants
Remember to factor in a period where your property is likely to be empty and therefore not making any returns on rent. To help minimise these down periods, make the property as appealing as possible for potential renters. Go for basic, neutral tones and make sure the main areas of the home (the kitchen and bathroom/s) are always kept in good condition. Also make the most of your outdoor areas; a well-landscaped backyard is a huge asset for any home, while your front lawn is the first thing prospective tenants will see.
Prior to making your purchase, always be fully informed of what you’re signing into. An investment property is a long-term investment, so be sure to manage your risks. The longer you can afford to stay in the investment property market, the better your financial outcomes will be.