04Oct

10 things to look out for when buying an investment property

Property investment can be daunting – it involves big dollars, big debt and lots of planning and paperwork….
Below are 10 things to consider before delving into property investment .
1. Have access to working capital … Have some cash facilities available .
Get a facility that has an offset account. Make sure you have access to cash in case if emergencies.
Try not to be involved in a forced sale unless you are buying !
Property cycles are important and investors must make all purchases with an eye to the long term.
2. Buying based on research and don’t have preconceived ideas 
Choosing to invest in a property specifically because it is in the same state or suburb in which the investor lives can limit your potential to leverage socio-economic and demographic trends. 
Buying in an area that is heavily reliant on a single industry or feature can be a classic mistake. Try to find locations that are vibrant and have a diverse range of businesses, near schools and transport in a growth area .This will better shield your investment in the off-chance of hard to predict structural economic change.
Buying in a different area with more growth potential 100 kilometres away, for example, is much better than buying near the owner-occupied location just because you can drive past it every day.
3. Getting emotional about property.
Investing is a numbers game. Always treat your investment properties as a business and do not get attached to them.
 Obtaining a fixed interest only loan to max your tax deduction 
Investment debt is tax-deductible debt; 
home loan debt for the purpose of having bought the owner-occupied home is not tax deductible. 
Investment debt secured against the home can also be tax deductible while the mortgage on your principal place of residence is not. Consider the benefits of having interest-only and run the numbers. You’ll be surprised how much better off you could be.
4. Forgetting to take out insurance.
Landlord and other necessary insurances, such as building insurance, can be a considerable expense. But there is no excuse for not ensuring yours is up-to-date, especially if there is no body corporate in place. Always check, and double check, your insurance.
5. Forgetting to factor in costs.
That means stamp duty, rates, insurance, agent fees, maintenance allowance and water. It also means capital gains. If people thought about exit costs just as much as they do entry costs, they would possibly reconsider selling at the time originally planned. Undertaking a thorough cost analysis before embarking on any property investment is a must.
6. Get a professional depreciation schedule will always bite you on the backside. You may save a few bucks, but it could cost you big time in the long run. It is wise to always employ the services of a quantity surveyor to ensure any tax deductions being claimed are maximised and accurate
7. Waiting for the perfect property.
There is no such thing as the perfect property. Your job is to the find the one that will be a successful investment.
8. Only having your home as an investment 
Most people feel content doing nothing, because doing nothing involves no risk to most people at that moment in time. Consequently they feel safer. However, the fear of doing nothing should be greater than the fear of doing something, unless you are happy to rely on the government safety net for your retirement.
9. Not knowing your borrowing capacity.
A rookie mistake. Best to engage a broker, rather than going directly to a bank, as some lenders have better servicing calculators than others. A good broker should be able to get you the best deal available in the market at that particular time and save you the trouble of visiting a dozen different providers. 
10. Doing it yourself.
I get it, everyone is good at something. But very few people are good at investing in property successfully, so why not engage an excellent financial planner specialising in property? 
No one thinks to perform complicated surgery on themselves, so why would you look to assemble a portfolio of investment properties by yourself? Be smart, tap a professional for help.
If you need a referral to the best people – let me know! 
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