The rental property market is very strong in all the major cities around Australia and finding one that ticks all the boxes can be hard. Realistically if you have a steady income and your job is secure, its never been a better time to buy with interest rates around 5%, you can find lots of positive geared properties. The question is how will the property you purchase assist you to build your wealth? Even positive geared properties can have a negative impact on your future wealth with expensive capital costs down the track, so choosing the right property is vital.
It really comes down to the economics of the purchase and the potential for capital gain. I’ve seen hundreds of clients with rental properties make low to moderate long term gains, the clients that have excelled at building their Real Net Wealth in property have used my 10 tips to purchasing a growth property.
- Research the suburb to find out what type of properties are in demand, what are selling at a premium and target properties which are undervalued in this category.
- Find property that is livable and doesnt require major structural renovations (or factor that into you buying price)
- Look for a property in an established area, close to public transport/universities (not primary schools)/shops/parks etc
- Look for undervalued property (ugly properties, bad colours/carpets/kitchens) but with good floor plans.
- look for property with multiple uses eg, has a granny flat/office/workshop – additional rental opportunities
- look for properties that have potential to rent each room/upstairs downstairs close to universities etc
- Do the cash flow analysis find out how much it will cost you… factor in estimates for depreciation and Tax benefits
- Buy the property in the right names/structure.. eg Property Trust or seek tax advise as to who’s name you should buy the property in. Property trust are a fantastic vehicle if the property is positively geared it has the potential to save you thousands each year in tax, and even more saving to be had to reduce Capital Gains Tax
- Choose the right loan, go interest only, structure your loan with an offset account rather than a redraw (this will assist you from a tax point of view in the future should you wish to move back into your rental)
- Negotiate – get familiar with the way real estates agents work, and learn negotiation techniques to deal with them… you can save 10’s of thousands – its worth the investment!!
For more information on purchasing the right property, negotiation techniques, research, analysis and tax implications please don’t hesitate to contact us.
