If investing in property is on your radar for 2024 or sooner, you want to be as prepared as possible. Property investment doesn’t need to be complex. In fact, there are several simple steps and clear principles you can plan for and follow that are proven to deliver steady returns over time.
Buying a suitable investment property is based on the same fundamentals used to buy an owner-occupied home – with one small but significant difference.
According to Jaime Pratt, head of PM at VPM, investors must make decisions with a business mindset. “The best advice is to remove all the emotion from the situation and focus solely on the bottom line,” she says.
It has been suggested to rent where you want to live and buy where you can afford.
In essence, the key to successful property investment is to purchase an affordable, attractive and well-located property that will ensure steady rental income and strong capital growth.
“Tenants are increasingly looking to buy a lifestyle,” Jaime explains, “so it makes sense that the property they rent is close to conveniences like public transport, shops, restaurants, parklands and schools.”
When considering buying a new investment property or off-the-plan development, you should also factor in depreciation. Reduced stamp duty can also be pivotal in your decision to buy a particular property.
Know your end-game
Jaime also suggests identifying your primary reason for wanting to invest in real estate. Knowing your ultimate goal will be vital in establishing a clear strategy with your financial advisor.
Do you want an investment property that provides sufficiently high rental returns and, therefore, is self-servicing, meaning you have little or no ongoing payments to make? How quickly do you want to hold the property? Do you have a plan to sell in a year or in ten years?
Perhaps you’re after significant Capital Growth so you can cash in on the benefits of negative gearing to reduce your tax burden. “When the rental income doesn’t cover the mortgage repayments or the day-to-day expenses involved in retaining the property, and you have to make up this difference, this is known as negative gearing,“ explains Jaime.
“This financial loss can be used as a tax deduction and may vary according to which tax bracket you are in. You should also always be prepared for the impact of interest rate rises or a prolonged period of vacancy when your property is not tenanted. All these things will affect the type of home and the location of your investment property.”
Your investment strategy will be influenced by your approach. The method you choose will be central in helping you decipher the kind of property you buy, how long you hold it and where you look for it.
“Property should be treated the same as any other investment,” Jaime advises, “the higher the return, the higher the risk, but with insightful research, thoughtful planning and attention to detail in each step of the buying process, you can easily minimise the risk and any undue stress.”
She likens an investment property to a fine wine. “If you nurture it and allow it time to mature, the rewards will multiply,” she says.
For financial advice, consult your home lender, financial advisor or bank. Alternatively, touch base with our qualified team for further investment guidance for peace of mind.