Entering the world of property investment can be both exciting and daunting. With so many opportunities and potential pitfalls, having a clear set of guidelines can make all the difference between success and regret. After years of experience and countless deals, I’ve refined my approach to property investment into four key principles that have consistently guided me toward success. Whether you’re just starting or looking to refine your strategy, these rules can help you make smarter, more confident decisions.

 Rule 1: Don’t Chase the “Once-in-a-Lifetime” Deal

One of the most common traps new investors fall into is the belief that they need to seize every opportunity immediately, fearing they’ll miss out on the perfect deal. This scarcity mindset can lead to hasty decisions and unnecessary pressure. The truth is, there will always be another property. 

Real estate is a dynamic market, and opportunities are constantly emerging. By keeping this in mind, you empower yourself during negotiations. When you know there’s always another deal around the corner, you’re less likely to cave under pressure or overextend yourself financially. Remember, the investor who can walk away from a deal always holds the upper hand.

 Rule 2: Know Your Numbers Inside Out

Property investment is a business, and like any business, success hinges on understanding the financials. Before committing to a purchase, it’s essential to conduct thorough research and have a clear picture of the costs and potential returns. This means evaluating the property’s current market value, estimating rental income, and calculating expenses like maintenance, taxes, and management fees.

Don’t let emotions or personal preferences cloud your judgment. Unlike buying a home to live in, an investment property should be assessed purely on its potential to generate income and grow in value. Stick to neutral, market-friendly choices when it comes to property features and focus on what will appeal to tenants and future buyers.

 Rule 3: Stay True to Your Investment Strategy

Every successful property investor has a game plan. Whether it’s flipping houses, developing properties, or holding onto rental properties for long-term growth, the key is to stick to your chosen strategy. Switching strategies mid-course because of a tempting short-term gain can undermine your long-term success.

Consistency is crucial. Just like planting a tree, property investments take time to bear fruit. By remaining patient and committed to your plan, you allow your investments to mature and generate sustained returns over time. Deviating from your strategy can lead to missed opportunities and increased risks.

 Rule 4: Prioritize Quality Locations and Properties

Location is one of the most critical factors in property investment. A good property in a strong location is more likely to offer reliable rental income, appreciate in value, and attract quality tenants. When assessing a potential investment, consider factors like local employment rates, public transportation, crime rates, and the general demographic of the area.

Additionally, decide whether you’re looking for a new or existing property. Newer properties often come with lower maintenance costs and attractive tax benefits, making them a great choice for passive investors. However, if you have the skills and time, renovating an older property can lead to significant value appreciation. Just be sure to weigh the costs and potential gains carefully.

Finally, think about who might buy your property in the future. Properties that appeal to both investors and owner-occupiers tend to have a broader market appeal, which can be a significant advantage when it comes time to sell.

 Conclusion

These four golden rules have helped guide me through the complexities of property investment, allowing me to make informed decisions and avoid common pitfalls. By understanding that there’s always another deal, knowing your numbers, sticking to your strategy, and focusing on quality locations and properties, you can build a successful and sustainable property portfolio. Whether you’re just starting out or looking to refine your approach, these principles can help set you on the path to lasting success in the world of real estate.

Embarking on a property investment journey in Australia can seem daunting, but with the right approach, it can be a lucrative and rewarding endeavour. Here’s a step-by-step guide to help you get started:

 1. Assess Your Financial Situation

Before diving into property investment, evaluate your financial health. Understand your cash flow, savings, and how much you can afford to borrow. This will help you set a realistic budget and plan your investments accordingly.

 2. Set Clear Goals

Define your investment objectives. Are you looking for steady rental income, capital appreciation, or both? Having clear goals will guide your decisions and keep you focused.

 3. Choose the Right Property

Decide on the type of property you want to invest in – house, unit, apartment, or commercial. Research prime locations in major cities like Sydney, Melbourne, and Brisbane, where property values and demand are typically higher.

 4. Think Logically

Property investment should be driven by financial logic, not personal preferences. Focus on properties with good potential for capital growth and high rental yields, rather than those that appeal to your taste.

 5. Conduct Market Research

Understand current market trends, property values, and future growth areas. This will help you make informed decisions and identify the best investment opportunities.

 6. Understand Tax Implications

Familiarise yourself with the tax aspects of property investment, including negative gearing, capital gains tax, and depreciation deductions. These can significantly impact your returns.

 7. Educate Yourself

Attend property investment seminars and seek guidance from experienced investors or consultants. Education is crucial to avoiding common pitfalls and making informed decisions.

 8. Develop a Solid Strategy

Whether you plan to flip properties for short-term gains or hold them for long-term appreciation, having a solid strategy is essential. Consider factors like renovation budgets, timelines, and potential rental income.

 9. Take Action

Once you have a clear plan and sufficient knowledge, take action. Hesitation can lead to missed opportunities. Start with your first property and gradually build your portfolio as you gain experience.

 10. Prepare for Long-term Commitment

Property investment is a long-term game. Be patient and prepared for market fluctuations. Diversify your investments to manage risk and maximise potential returns over time.

The Australian real estate market is a dynamic and ever-changing landscape, influenced by various factors such as economic conditions, population trends, and government policies. For individuals keen on staying ahead in the property game, platforms like Australian Property Update serve as valuable resources. In this blog, we will delve into the intricacies of the Australian real estate market, exploring insights and trends provided by Australian Property Update.

Understanding the Current Landscape:

As of the latest update from Australian Property Update, the Australian real estate market has experienced both challenges and opportunities. Economic fluctuations, coupled with ongoing global events, have had a significant impact on property values and investment trends.

Property Values and Trends: Australian Property Update offers a comprehensive view of property values across different regions. The platform allows users to explore current trends, providing valuable data for both home buyers and investors. Understanding these trends can empower individuals to make informed decisions regarding property purchases or sales.

Investment Opportunities: The real estate market is rife with opportunities for savvy investors. Australian Property Update helps users identify potential investment hot spots by analyzing market dynamics, growth patterns, and upcoming developments. Whether it's residential, commercial, or industrial properties, staying abreast of investment opportunities is crucial for financial success.

Government Policies and Their Impact:

Government policies play a pivotal role in shaping the real estate landscape. Australian Property Update provides insights into the latest policy changes, offering users a glimpse into how these alterations might affect property values, demand, and overall market stability.

Regulatory Changes: Stay informed about any regulatory changes that may impact the real estate market. This could include alterations to lending practices, tax incentives, or zoning laws. Australian Property Update's analysis of these changes helps users navigate the evolving regulatory environment.

Government Initiatives: Government initiatives, such as infrastructure projects and economic stimulus packages, can significantly influence the real estate market. The platform's updates keep users informed about these initiatives, allowing them to anticipate potential shifts in property values and demand.

Market Predictions and Forecast:

Predicting market trends is a challenging yet essential aspect of real estate investment. Australian Property Update utilizes data analytics and market research to provide users with forecasts and predictions, aiding them in making strategic decisions.

Market Dynamics: Explore Australian Property Update's insights into market dynamics, including supply and demand trends, interest rates, and economic indicators. Understanding these dynamics enables users to position themselves advantageously in the market.

Future Growth Areas: Identify future growth areas through the platform's analysis of demographic trends, urban development plans, and economic forecasts. Whether it's a burgeoning suburb or a city undergoing revitalization, the Australian Property Update helps users spot opportunities for long-term growth.

Conclusion: The Australian real estate market is a multifaceted arena, and staying informed is key to success. Platforms like Australian Property Update provide a wealth of information, empowering individuals to make strategic decisions in an ever-evolving market. Whether you're a prospective home buyer, seller, or investor, leveraging the insights and analyse offered by Australian Property Update can be a game-changer in your real estate journey.

Find out the key reason why ‘Location, location, location!’ is the first rule of property investing. Your investment property won’t outperform as well as you’d hoped if the area isn’t desirable. If you fail to pay attention to location, you’re apparently putting yourself to the risk of a failed investment.

There are a few attributes of a hot location that all investors must pay attention to.

Growth in Population
To make money, investors need to be certain that there will be demand for their properties. Whether you’re investing for income or for capital gains, or both, you’re going to need people at the location who want to rent or buy properties and population growth can give you a pretty good idea of this demand.

Throughout the country’s history, Australia has been consistently adding people through natural growth and immigration. This is particularly the case for the capital cities, where both native Australians and immigrants flock to. As to which capitals have the highest population growth, the following chart shows that Sydney and Melbourne, perhaps unsurprisingly, outpace all other cities in the past 50 years. Brisbane, Perth, and Adelaide complete the top five, but at a distance. Not coincidentally, these areas also have Australia’s highest-flying property markets.

Now, it’s crucial to remember that there are markets within markets. If you’re looking at Sydney, for example, there are suburbs and areas within the city that have added or are adding more population than others. Furthermore, you also have to decide whether you want to pay high prices for properties in high growth areas. Some investors may prefer to look for areas that are set for growth where property prices are not too high yet.

 

Employment Prospects

Population growth almost always comes with job growth. If not, this  growth may not be sustainable. As soon as the job market dries up, people may actually move away. If you invest in a residential property that’s within an employment hub, for instance, it’s going to appeal to workers in the area who want to rent or buy. Once again, such properties are most likely going to be costly.

New investors may not be able to afford them, or they may bite off more than they can chew. If this is the case, you may want to look for a property in a nearby suburb. Or, you may put a little more work into finding an area whose job market is about to explode.

 

Demand and Supply

Basic economics dictates that more supply, with respect to demand, will put downward pressure on prices. And when reversed, more demand will put upward pressure on prices. Therefore, if you want to make money, you’d want to invest in an area where demand outstrips supply.

Higher demand will almost always result in higher rental and sale prices for your investment property. However, there isn’t any data that directly says “supply” or “demand”.  You’ll have to draw a conclusion from other market data. For example, population growth would indicate higher demand. So would high auction clearance rates, or rising property prices.

 

Access to amenities

Everyone has their own opinion of what a good neighbourhood should look like. Still, there are a few characteristics that appeal to all. The first is accessibility. The neighbourhood should have connections to the city’s major highways and more than one entry point. Otherwise, the morning and evening commute could be such a headache that people wouldn’t want to live there. That’s also true of the presence or absence of public transport facilities in the area.

Likewise, the neighbourhood’s appearance matters. Attractive landscapes, towering trees, and community spaces may contribute greatly to a neighbourhood’s appeal. 

Another way to look at a neighbourhood’s appeal is to assess the length of time that an average house spends on the market. Quick turnover is a good sign, as it suggests that people find the area desirable. Last but not least, an attractive neighbourhood should have amenities that appeal to residents. These include schools, grocery stores, restaurants, retail spaces, entertainment venues, and more. Preferably, your investment property should be accessible to these amenities.

 

ROI of the area

The price-to-rent ratio of an area will show if buying for capital gains or for rental is the better option. To calculate the ratio, just divide the area’s median house price by the median rent for the year. The typical values for Australia are:

Keeping all this in mind, here are some general guidelines for understanding price-to-rent ratios in your specific area:

• Price-to-rent ratio of less than 15: It’s cheaper and more affordable to buy versus rent.
• Price-to-rent ratio of 16-20: Leans towards renting as a better option over buying.
• Price-to-rent ratio of over 21: By renting you are making a much better personal finance choice.

For new investors, it’s generally easier to make money if the ratio is low. If the price is low compared to the rent, it means, right off the bat, you should be able to rent it out at a price that can cover the monthly mortgage payments. Conversely, if the ratio is high, it may indicate that there are a lot more buyers than renters in the area. You might be able to make more money by flipping houses than renting it out. 

Doing the due diligence

Proper due diligence is one of the most important pieces of purchasing real estate. If the property isn’t what you thought it was, it may suddenly be worth a lot less than what you paid for it, and you will have a hard time selling it to somebody else. You can’t return it, so be sure that you’re making a well-informed decision when you decide to close on a property.

The location is one of the most important decisions that you’ll have to make when looking for a property to invest in. Because of this, you should take your time in assessing whether a particular location is conducive to growth or not. The above contains some of the most important things to consider about an area. You’re going to want to have all the relevant information before you invest.

 

Food for thought!!

The richest in the world have made their fortunes in many ways, but there is one common thread for many of them: They made real estate a core part of their investment strategy. Of all the ways the ultra-rich made their fortunes, real estate outpaced every other method.

If you, too, want to invest like the wealthiest in the world, we can advise on how you need to take your first steps. Take the first step toward building real wealth by booking an obligation free session with us by entering your details below and one of our team member will be in touch with you soon.

There are loads of interesting points when taking out a home loan. If you’re ready to evade some basic slip-ups, it tends to be a genuinely smooth cycle. 

To help keep you out of the dismissals, here are the home credit application mix-ups to look out for. 

Speak the truth About Your Income 

Your salary and costs assume an indispensable job in credit worthiness. Knowing this, numerous candidates present a mutilated image of their funds. They may forget about certain costs to cause the moneylender to accept that they have more discretionary cash flow. This is a huge error that can get you into a wide range of difficulty. 

Above all else, the loan specialist probably approaches more data than you might suspect. They will investigate each part of your funds. On the off chance that they notice any warnings, not getting acknowledged may be the most unimportant part of your issues. Since you’ve needed to vouch that everything was exact to your best information, it’d be inside the loan specialist’s entitlement to sue you. Besides, changing authority reports is illegal. You could wind up in court for lying on your application. Continuously present all your monetary and other information precisely. Like it or not, the moneylender will presumably know reality in any case. 

Not choosing a loan product based only on interest rates 

The financing cost is the greatest cost of a home loan advance, some of the time surpassing the head over the term of the advance. It may bode well, in the brain of many, to pick the bank that offers the most reduced rate. There are numerous situations when this wouldn’t be a smart thought. 

For example, there are different costs that the moneylender probably won’t reveal from the outset. These may incorporate special financing cost period, continuous charges, protection, early reimbursement expenses, and that’s just the beginning. You may likewise not know about these costs except if you really experience the fine print. Also, it’s normal for these to include. 

Plus, there are additional non-monetary credits that you should consider. For instance, reimbursement adaptability can have a major effect in the amount you’ll wind up paying altogether. The exercise is this, don’t pick a moneylender or loan dependent on the loan fee alone. Shop around and think about all the significant agreements that can affect your reimbursement. 

Not checking your borrowing capacity and neglecting to get a Pre-Approval 

You may not have the foggiest idea about this, however every time your advance application gets dismissed, it can bring down your financial assessment. Furthermore, in the event that you get dismissed a few times in succession in a brief timeframe, banks will feel that something must be up in case you’re so urgent to get an advance. 

Truly you would prefer not to apply except if you’re sure that an endorsement is likely. Furthermore, the most ideal approach to discover is to get pre-affirmed. 

A pre-endorsement surveys your usefulness, and it will incorporate the amount you’re pre-affirmed to obtain. Equipped with a pre-endorsement letter, you presently emit a feeling that you’re a genuine purchaser who’s prepared to purchase, so specialists and sellers are sure to consider your offers truly. 

Realise that a pre-approval isn’t equivalent to pre-capability – the previous is a lot harder to get.

If you are considering buying a property, home mortgage is the most important factor to be analysed by a qualified broker before you even think about investing. Talk to an expert today and get a better understanding of loan products. Leave us your details below and one of our team member will be in touch to take care of your queries.

The year ahead will be a time to move forward. I don’t know when the next recession is going to happen, but I do know that it’s inevitable and when it hits it will make 2008 seem small in comparison…like nothing.

No one was ready for the 2008 recession and only those survived who had recession proof plans in place.

If you want to be ready for the next big opportunity, you have to reach a point of acceptance as fast as you can and prepare based on what you know. 

I’m not talking about adapting in real time-there’s a need for that too but the more you prepare in advance the less you’ll have to adapt on the fly which is the time when mistakes are most likely to happen.  I’m saying that I go back to zero, the worst case-scenario and take it from there.  I put myself in the mindset that I’ve lost it all; my money, my businesses, my brand, everything. Now what do I do? I tell my team to think like we have nothing and come up with a plan to dig us out of this theoretical hole and rebuild.  Of course, I’m confident that we’ll never find ourselves in such bad shape but if I’m wrong and disaster does strike, I know we’re ready to handle whatever comes our way.  It’s a matter of being proactive and not reactive.

Like I said, being proactive will create opportunities and produce results. On the flipside, if you just sit around waiting for the worst to happen it will, and no matter how much you brace yourself you will get rocked. How do you arm yourself so you’re prepared for whatever happens?  You invest in yourself by gathering as much information as you can cram into your head and you learn so you earn.

The well-informed will be able to do great things while the uninformed will remain stuck where they are or struggle and eventually sink. 

Getting information and then utilizing it to maximum effect by committing totally to your goals is the strategy for success in 2021. You can expand your business during COVID-19 or any other crisis. You can make money. All you need to do is take it back to zero, educate yourself and then get back to earning when you can.

“Do not let the news or anything else going on define you or your investment journey.”

Planning form the very basic of getting into the recession proof property portfolio. If you want to know more how different strategies help in achieving that. Talk to one of our expert team member who can guide you to set yourself up for the next hit. Leave us your details below for a obligation FREE strategy session.

What positive and negative gearing mean for your investment strategy?

Gearing simply means borrowing to invest.

A positively geared property is one where your incomings i.e. rental income are higher than your outgoings i.e. mortgage repayments, repairs, strata fees, council rates, resulting in positive cash flow before tax.

Negative gearing is when the ongoing costs of owning a property add up to more than the rental income it generates. Put simply, the property produces a loss each year.

Not all investment properties are negatively geared. A property is positively geared if it earns an annual profit. That is, the rent outweighs the ongoing costs. Depending on your situation, both positive and negative gearing are strategies that could work for you. 

The ADVANTAGES of Positive Gearing properties-

Cash in Hand : Having a property fully covered by rental income means that you immediately begin generating positive cash flow. 

Profit from the start : Positive cashflow means immediate income from your investment right from the start.

Increased purchasing power : As a result of having a better cash flow, you can potentially use this to further build your investment portfolio or pay down an existing mortgage on your principal place of residence faster.

Note– Income generated from a positively geared investment is counted as extra income and thus will be taxable.

 

The ADVANTAGES of Negative Gearing properties-

Reduce taxable income : When a property is negatively geared, the shortfall can be claimed as a loss when doing your tax return. By reducing your taxable income you can reduce the amount of tax payable.

Focus on capital growth : Investors who choose negative gearing are typically targeting long term capital growth above their accumulated losses for when the property is sold. This means that in the short term, negatively geared investors are able to save on tax whilst benefiting from long-term capital growth.

Lower Interest Rates : Interest rates are currently at a historic low in Australia, making negative gearing a popular option for many investors as many properties are now only incurring a small loss, making it easier to hold onto an asset.

Note– Cash reserve is often needed to maintain a negatively geared investment strategy to ensure you’re able to hold the property long enough to achieve the targeted capital growth.

 

The above differences between the two, illustrates the importance of considering your options carefully prior to buying an investment property or building a long-term investment strategy. 

We, at Investors Institute Melbourne can help tailor a strategy to suit your goals and situation and introduce you to other finance professionals who could help you minimise your tax in the short term whilst building quality assets to your name over the long-term.

Book an obligation free appointment to get started without procrastinating your desires and goals further.

Looking forward to getting in touch with the aspiring go getters and positive minded people. Enter your details below and one of our team member will get iim tough for a FREE STRATEGY SESSION to help you understand how to overcome hurdles in your investment journey.

The more you put in life the more you derive out. Winners don’t do different things but they do things differently..

The foundation step of real estate investing is programming your mindset for success. The most important step in which your success will be built on. You must always maintain a strong mindset and constantly replenish your positive outlook on achieving your goals.

The Second step is finding a vehicle that works for you. Finding the right vehicle for your success is vital. This will be the concept and structure that steers your success in the right direction and we at IIM can design and strategize the customised structure for you.

The Third step is taking action.  successful people do not just think of a great idea and sit on it. They make things happen! They get out there and take action.To manage your success, aim to have all three steps active, this is how you will grow successful. Along the journey, you will have different steps to work on, and our team will give you the tools to focus particular attention on strengthening each step, allowing you to achieve your maximum potential. We are talking about financial freedom. In the capitalist society that we live in,whether you like it or not, money is the cornerstone of this society. In reality, having more money can give us more time, more freedom, and more opportunities in life.

But this can only happen if you have the right mindset and appropriate financial planning to use the money wisely for bettering your lives.

Most people get sucked into this belief that success is about what we do, where we live, the car that we drive, and the clothes that we wear but in actuality success is going above and beyond to set the right goals and working smart enough to achieve the ultimate goals.

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When it comes to achieving, it is important to have an expert on your side who can guide you along the way. If you wish to have an expert walk in hand in hand with you along the path towards success, leave us your contact details below and one of expert strategist will get in touch to get you there.

Our property markets have been remarkably resilient so far but let us see how a second wave of COVID-19 will affect the market.

In spite of the coronavirus-induced economic downtrend, Australian property values didn’t crash as some predicted would, and Australia, other than Victoria, has done very well in containing the virus. Clearly, the significant financial stimulus and support measures provided by our governments have kept the doors of many local businesses open and many people in their jobs.

At the same time, rental relief packages have kept tenants in their homes and mortgage support has meant that there have been very few forced sales. However, home buyers and sellers went on strike, choosing to postpone their next move until more certainty returned.

Well, if we look back, there are a few lessons we can learn to help us better understand what’s ahead.

Of course, no one really knows what’s going to happen to the economy and property values, so it’s important to analyse and anticipate the possibilities and the probabilities.

How our real estate markets would be affected by a second wave would depend on how rapidly the health issues come under control, how quickly businesses resume normal trading, how soon our economy picks up and, most importantly, how quickly consumer confidence rebounds. Not surprisingly there’s a strong relationship between how people feel about their finances and job security and the financial decisions they make, and this, in turn, will flow through to how our economy recovers and our property markets will perform.

When we feel confident about our financial circumstances, we’re more likely to feel safe in making significant financial commitments, such as buying a new home or investing in property. But like earlier this year, property values won’t plummet, because it’s unlikely that there will be a flood of properties for sale.

Interestingly, while the number of investors in the market is currently at very low levels, first-home-buyers are taking advantage of the government grants, the HomeBuilder allowances and the prevailing low-interest rates and getting a foot into the property ladder. And this trend is likely to continue.

The Synopsis

Property is resilient and very different to the volatile share market and other types of investments.

One of the major lessons I have learnt from the past economic downturns is the importance of taking a long-term perspective which always outsmarts short-term impulsive and  reactive thinking. But it’s normal human nature to find it difficult to buy your new home or invest when everyone else is running around thinking the world is coming to an end.

However, now that I have invested through various property cycles, I have found that it is exactly these conditions that present the best opportunity to grab which essentially means that now is the time to get prepared to take advantage of the opportunities that the market is offering will continue to offer till things get back to normal. Be hopeful and as we all know that after each global financial crisis, there has been an increase in property prices, and there is no reason to suggest this will be any different after we get out of this Pandemic.

If you resonate well with this, please feel free to take advantage of the current times and contact us to start the journey of investment and get the know how to climb the ladder of success and financial freedom. Leave us your details below and one of our get an obligation FREE Strategy session with a property expert and see where you stand in the current scenario.

Looking to invest but unsure whether to build or buy established?

Often when people are considering an investment property they look towards existing homes or apartments, but the benefits of house and land packages should not be overlooked. Some very attractive features include increased deductible tax benefits, offsets available as well as significant stamp duty savings. New homes in well-located areas also have the added benefit of being very attractive to tenants and attract higher calibre of tenant.

Here are five top reasons why house and land packages make great investments:

Stamp duty savings

One of the most significant advantages to choosing to build a new home is the savings you can make on stamp duty. When purchasing a house and land package, because the house has not yet been built, you only pay stamp duty on the land and not the full purchase price. On a typical house and land package of around $450,000, you will save around about $8,000 in stamp duty. House and land packages offer an affordable option for those wishing to invest in property (and particularly first-time investors), where continued price growth has left established homes largely out of reach.

ChoiceWhen you opt for a house and land package, you have all the control right from the beginning. From an investment point of view, this means you can maximise your investment potential by tailoring elements to suit your specific needs and market. You’re able to consider who your ideal tenant might be and customise your house to suit what that market may be looking for. From choice of suburb, to selection of your block, house design, fittings and finishes, you can tailor a package to suit your investment budget and goals. Added features such as an extra bedroom or upgraded inclusions not only add appeal, but can also set you apart from similar properties in the area. 

New homes are more appealing

As a landlord you want to attract high quality long-term tenants to your property. New homes have the advantage of being incredibly attractive to tenants with modern conveniences and offer a place that tenants will love and want to stay in for many years. New homes also have the benefit of being able to charge premium rent so you will gain higher returns for your investment.

Depreciation 

The benefits of depreciation are significant in a new home and should not be overlooked. In a new home tax deductions can be claimed for depreciable assets such as the construction cost of the building itself as well as its fixtures and fittings. A new investment home costing, say, $250,000 with $30,000 worth of fixtures and fittings will create approximate deductions totalling $16,000 per year together with benefits received from claiming for the payment of rates, interest and rental management.

Low maintenance costs

As a landlord, you have the responsibility to ensure any issues with your property are addressed promptly and ensuring the upkeep of your investment property can be a considerable cost, particularly for older homes which are likely to require more ongoing repairs and maintenance. Likewise, when buying an established property there may be necessary or unexpected upfront costs, such as pest inspections, building inspections or even costly renovations. 

A brand-new home built to current quality standards is less likely to have any issues and some components may even be covered by Builders Warranty Insurance for several years. Higher quality materials and advanced construction techniques mean new homes are not only well built, but also efficient and economical to maintain. 

If your investment goals include a low-maintenance property that appeals to renters, gives you tax benefits and is at a  affordable price tag, then a house and land package may be the right investment opportunity for you. If you have any questions and want to discuss more about it. Book in a FREE Strategy session wit one of expert property strategist and get your queries resolved. Leave us your details below and one of our team member will be in touch soon.

With different investment strategies, there are various ways you can structure the purchase and ownership of your property assets.

It’s advisable that you seek guidance from an experienced property investment expert around the best type of structures for your specific requirements, as this isn’t a “one size fits all” proposition.

For beginners, different structures will come with different associated tax repercussions and some will be more advantageous than others, depending on why and how you’re investing in property. Furthermore, how you obtain finance, along with the level of security your asset base benefits from as it evolves and provides an income into retirement, will all largely hinge on how you structure your property investment portfolio.

This is something you should aim to get right when starting out on your investment journey, because it can be costly and tricky to untangle a messy ownership structure.

There are many owner ownership structures. They are classified as below

Individual Names

These are generally the most common ownership structure associated with residential real estate, as most of us will acquire a home in our own name (or names if in a relationship) and it’s by far the easiest way to transact property. The only extra cost for property investors is your accountant’s fee at tax time.

While the benefit is that you maintain complete control over the property, the payoff is that the asset is exposed to any litigious action should someone decide to sue you. In other words, the courts can force you to liquefy real estate assets. Plus,if you hit a financial rough patch and default on your financial commitments, a credit card company, they can make a claim on any assets in your name to repay outstanding debts…including property you own.

From a tax perspective… The benefit of individual property ownership for investors is that you gain the full negative gearing advantage at tax time, particularly if you happen to be in a higher income tax bracket. On the flipside, income tax will apply (at a marginal rate) to your property portfolio when it transitions at retirement and starts to produce positive cashflow for you to live on.

 

Joint Ownership

Is similar to individual ownership and can be done one of two ways, as either: Joint tenants – often used by owner-occupier couples who then both own a half share of the property. If one person dies, full entitlement over the asset automatically defers to the living owner on title. Tenants in common – means you own whatever portion of the property as agreed on between all parties to the purchase. The total delegation of shares must add up to 100%. If one person dies, ownership transfers according to the terms of their Last Will and Testament. This can be a good way for couples to divide up the asset according to who might be the higher income earner, thereby reducing their combined tax loss by reducing the larger debt through optimal use of negative gearing entitlements.

From a tax perspective… income and expenses are split evenly across both parties, which makes this a very basic and not necessarily effective ownership structure.

 

Companies and Family Trusts

Hardcore property investors who are in it to generate serious wealth will often have some or their entire portfolio structured in such a way that their assets are legally owned by a company/companies and/or trust(s). These entities are a lot more complicated to establish and administer and therefore, generally come at what can be quite a significant cost.

A trust is a legal arrangement whereby control of the property investment is transferred to the nominated trustee, for the beneficiaries’ benefit. In other words, the trust buys the property and the trustee distributes any profits to you and your nominated family members at its discretion – the beneficiaries. They are then required to pay tax at their marginal rates on the disbursement received. A trust deed is created that declares who can appoint a trustee and the current person appointed in this role, and it’s up to that trustee to determine who to distribute the profit to, in accordance with this deed. Typically, trust dividends are disseminated on June 30 each year.

Taking it a step further, you could also create a company to be appointed as a corporate trustee. As the company director, you have more control over how profits are apportioned and, when you die, who gets to take the reins of the trust. Many investors, particularly those in so-called ‘high risk’ professions where litigation is common (e.g. medicine) – use these structures to shelter their assets from direct threat should someone decide to sue them.

Rather than being in an individual name and exposed, the property investments are not technically owned by the investor, but the entity that acquired the real estate in the first instance – the trust or company. Given the costs associated with establishing and maintaining these structures, they certainly are not for everybody. Establishing a trust or company for investment purposes is generally most beneficial for self-employed high-income earners, or those who have already been accumulating property in their own name for some time and require a more secure and tax-effective structure.

Trusts or companies cannot be created for the sole purpose of avoiding taxes either, and family trusts can’t distribute any losses, which negates the potential to claim any negative gearing entitlements on real estate in this structure.

Self-Managed Superannuation Funds (SMSF)

Self-Managed Superannuation Funds are gaining a lot of ground in Australia…where workers have historically relied on traditional managed super funds to do all the heavy lifting when it comes to providing a retirement income. When the 2008 GFC demonstrated that you couldn’t rely on others to plan for your future financial – even in something as seemingly benign (in terms of risk/return weight) as superannuation, more people began taking the reins of their own ‘nest eggs’.

Now the industry is worth over $500 billion in this country and the SMSF structure is proving increasingly popular among property punters, largely due to the attractive associated tax benefits, including:

1. In the accumulation phase, your SMSF can purchase income-producing property (using borrowed capital up to an LVR of 70% and fund balance of $120,000 plus), with any profits taxed at a capped rate of 15%. Unlike traditional tax rates applied to property related income at the investor’s own marginal rate.
   You also enjoy limited CGT liability, where any gain realised on property owned for 12 months or more by the SMSF is taxed at a maximum rate of 10%.
2. When you reach retirement and your portfolio starts to provide an income to replace your weekly paycheck, your fund converts to its pension phase. At this time, the income from your super becomes entirely tax-free, meaning no CGT liability and no income tax at all for SMSF owned property assets.
3. Your SMSF can claim negative gearing and depreciation benefits associated with property holdings (depending on the type, age and state of the asset), thereby reducing the 15% tax rate further and potentially creating a tax-free environment in some instances.

Of course the payoff is that you cannot claim any negative gearing or depreciation entitlements to offset your own personal income tax if your SMSF owns the property investments, plus these structures can be quite convoluted and costly to establish and administer. Although limited recourse borrowing has opened up the SMSF structure to more mum and dad investors, allowing funds to borrow capital for the acquisition of residential or commercial property, you still need a minimum balance of $120,000. Plus your fund needs sufficient liquidity to repay the loan, as well as maintain the investment. And it’s worth noting that you’re restricted in terms of what you can do with property held by SMSFs, in terms of redevelopment, for instance.

Understanding the structuring is the first step towards achieving your goal to be a successful property investor. If you are thinking of entering the arena, and want to know more about structuring and understanding in more depth. Leave us your details below and one of our expert property strategist will get in touch with you for a FREE STRATEGY SESSION.