Property has been a popular route to wealth for many Australians for many years. Buying their own home is often the first 'investment' many people make; purchasing another property may well be the second even before shares and other assets.
But your first investment in property needs to be your home. Buying a small apartment to rent can be a good way to accumulate funds so you can eventually buy your own place.
Majority of young Australians are choosing this route, buying in one suburb while renting in a more desirable and expensive area or living at home for a while longer.
Still others are diversifying into non-residential property via property trusts and syndicates.
Sensible investments in property have many attractions. Property can be less volatile than shares though not always and it tends to be regarded as a safe haven when other assets are declining in value.
It has the potential to increase in the value of your asset as well as rental income. Then there's the tax advantages associated with negative gearing.
However, as with any investment, there are no guarantees. Property prices go down, as well as up, and sometimes tenants are hard to find especially good ones who pay on time and take care of your investments.
Buying an Investment Property
Think twice about investing in property markets you are not familiar with, for example, a property that is recommended by a property developer.
Research recent sale prices to give you an idea of what you can expect to pay for property in the same area.
Look for properties with deatures that will appeal to as many people as possible. For example second bathrooms or lock up garages.
It is important to look for properties with low maintanace costs.
Look for a property that will attract more than one segmant such as singles, couples, young families or retirees.
Managing Invesment Properties
There are two options when it comes to managing your property, either do it yourself or engage a managing agent to do it for you.
Managing the property yourself can avoid paying managing costs. The downside about managing property is you need to do everything, from showing the property to tenants, collecting rents and organising repairs.
However if choosing to ask a managing agent to look after your property, you will have to pay them management fees,which are tax deductable.
While you need to pay for content insurance you will need to organise building insurance. this covers you for full building replacement for if for example your house burns down.
It is a good suggestion to take out landlord insurance. this protects you if your tentats damages the property or runs off without paying rent. This is tax deductable.
If you are relying on employment income to cover the interest cost and expenses make sure you have adequate income protection.
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