Investing in real estate property is an effective way to build wealth. If you own a real estate asset you can leverage cash flow, tax benefits, and long-term stability as property always gains value over time.
If you are reading this article, you have probably been reading other posts or articles about how to get started and score a great investment deal. But you’re still stuck.
No surprise. According to the latest Australian Financial Review reports, only 20% of Australians own real estate property.
The reality is real estate investments can be made simple. You just need to know the do’ and don’ts. And to help you get started we created a five steps guide to help you invest in real estate. Let’s get into it.
1. Review your finance
List all your incomes and assets versus all your expenses and map them out over a year to grasp your cash flow. This will help you understand how much you can invest.
If you need to ask for a loan, work out how much you have for the initial deposit. Consider that banks will ask you for around 20% of the total amount for an investment property, so be ready to have that.
Ensure that you have a clear understanding of how a loan will impact your monthly expenses and that you’re comfortable with it.
2. Ask for a pre-approval
Contact your bank or mortgage broker and ask for pre-approval. This is a formal indication that the lender has preliminarily approved your loan request. Remember not to overcommit in relation to expected returns.
The bank will take into account that you are investing in a property when assessing your application. They will want to know the likely rental return and likely occupancy of the property you’re investing in.
So do the math and present your request to the bank in a detailed fashion.
3. Set your goals
Be clear on what your goals are and what you want to achieve with your investment both in the long and short term.
For example, if you want to retire in ten years and use the investment property to support your lifestyle and living expenses, make a ten-year investment plan. Define the goals that you need to achieve year by year and break down what you need to do quarterly to ensure you follow through.
Establish deadlines to make your goal realistic, and more achievable.
4. Get your taxes right
Probably not the sexiest of the topics, but when it comes to investments, taxation is an important piece of the puzzle. Contact your accountant and ask for clarifications on:
1. Negative gearing and depreciation allowances. According to your specific situation, ask your accountant if it’s better to invest in a new or older building.
2. Name/s that are going to be on the contract. If you are buying with someone else this will impact future taxation so ensure that you are clear on what’s going to change.
All this will impact your yearly and long-term returns.
5. Search for the property and engage a property manager
When searching for the right property, use websites like reiv.com to gather information about the suburbs.
Find out more about the recent sale history of the area, how many properties are selling for, and how long they are on the market. The historical growth of the area, and indications of future growth – is this suburb people will want to continue to live in and will be invested in terms of infrastructure.
Engaging a professional real estate agent will be a game changer that will help you score great results.
Real estate agents spend their days investigating the property market and talking to buyers and sellers, councils, and local businesses. So they know what’s going on and they have the expertise to help you choose the best deal.
At Atria we have more than 20 years of experience in real estate and we have helped many clients achieve their investment goals. Call us on 03 8680 9421 or visit our Bay Street office for a chat to find out about how we can help you too.
