Your first step into the property market doesn’t have to be as an owner-occupier. Find out what’s involved in making your first purchase a rental property.
If you can’t afford your dream home in your preferred suburb, an alternative approach is to buy an investment property, and it’s a strategy that can offer real pluses.
A wider choice of suburbs
Buying a place to live in usually means choosing an area and property based on your personal needs and preferences.
Buying as an investor is a very different ball game. You have a lot more freedom to focus on affordable suburbs that appeal to tenants, not just you. And this has the potential to open up a greater variety of locations you can buy into.
The benefit of rental income
When you buy as an investor, you may not be entitled to the First Home Owner Grant, but on the flipside, you’ll earn rental income – money that can help with your loan repayments. This makes it important to look for areas where properties are commanding high rents relative to property values to help maximise your rental income.
The potential for negative gearing
Negative gearing is where the rent you receive from your investment property is less than the costs of owning the place. This creates a loss, which can often beclaimed on tax, so you could potentially enjoy tax savings on your regular wage or salary. This can be another financial helping hand to cover the ongoing expenses of your rental property.
Can your budget handle all the costs?
Even with the benefit of possible tax savings, you still need to weigh up whether you can manage the ongoing costs of owning your investment property. This is important if the property is vacant at any stage, more so if you are paying rent yourself. Bear in mind too, that an investment property can come with additional expenses. Property management fees are one such example unless you choose to manage the property yourself. These cost should be built into your investment budget.
Be prepared to keep good records
As an investor, be prepared to maintain good records for your rental place. This is a must-do so that you can accurately state your rental income and claim the appropriate expenses in your annual tax return. It shouldn’t be a hassle but it is something to bear in mind.
Pick your property with care
Buying as an investor may broaden the number of suburbs you can afford to buy in but it still pays to be selective about where you buy. Not only should the dwelling hold appeal to a wide variety of tenants, it’s a good idea to look at the area itself to assess the prospects for future price growth. Add in a low maintenance property, that’s not going to demand big upkeep costs, and you could be on a winner.
While you’re looking for the right investment property, let Aussie take care of the right loan. Chat to a broker today!
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- Chapter One : Getting started
- Chapter Two : Your Dream Home
- Chapter Three : Money Matters
- Chapter Four : Ways to Purchase
- Chapter Five : Understanding Interest Rates
- Chapter Six : Understanding Home Loans
- Chapter Seven : Lending Sources
- Chapter Eight : Getting Your loan
- Chapter Nine : Choosing a Home
- Chapter Ten : Steps to Settlement