10 Things To Consider Before Buying An Investment Property
Strategy – Every investment should be well planned and thought through. Ideally you want and overall property strategy including an entry strategy, an exit strategy and finally a finance strategy. It’s important to have the right loan for your investment strategy with the flexibility to allow you to reach your goals. Interest rates are not the only consideration!
Cashflow – Cashflow is King! You have, greater borrowing capacity, greater flexibility, more options (and a whole lot less stress) with regular, positive cash flow.
Gearing – You should consider whether negative geared or positive geared scenarios suits your investment strategy best. In Sydney it is hard to get a positive cashflow property unless you bring a lot of money to the table. Sometimes the best investment properties are not in your City.
Property Type – Consider the property most suitable for you to minimise tax and build wealth. Depending on deposit and borrowing capacity, different property types and stages of development could be crucial in putting together an investment opportunity for you.
Incentives – Take advantage of government incentives to build wealth.
Saving – Have a plan to save. Importantly save first and spend what is left, don’t spend first and save what’s left! A good savings habit will be looked favourably on by the banks when you apply for a loan and will also help you to be able to pinpoint when you will be able to hit certain milestones within your mortgage and general budgets.
Buffer – Have a financial buffer for ‘what ifs.’ This is different in every situation and a discussion should be had before you commit to finance and property as to how much this should be.
Fundamentals – Ensure any property you look at has good fundamentals; predicted population growth, low vacancy rates, high employment rates, infrastructure spending (public transport, roads, schools, shops, hospitals etc).
Tax Minimisation – The type of property you buy could greatly affect the cashflow achieved by your investment. A 60-year-old house for example has no depreciation available to offset against your income as depreciation is only available for 40 years. A new property will give you 40 years of depreciation which can be offset against your income. Simply with the right property, your tax dollars help support your investments. While you always want to minimise your tax, don’t be afraid to pay some tax……It means you’re making money!
The Right Team – Build a good team of professionals around you. Every good Investor should have a trusted Accountant, Solicitor, Real Estate Agent, Mortgage Broker, Financial Planner and most importantly someone like PanVest Property to help pull all this team around you and put you on the right path.
