Tuesday, April 23, 2019

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So, you are thinking of buying your first residential investment property? There are a few things to consider before making the move. Here are 10 tips for avoiding potential difficulties and ensuring success. 

1. Know your goal

Understanding your financial objectives is key to finding the right investment property. The actual property itself is rarely the end goal when it comes to investing - the financial elements should be your key focus. First, decide what your investment goal is and then create a plan to achieve it within a realistic time frame. 

Are you looking for a plan for retirement? An income-generator to fund your children's education? Or building equity to gain a regular income? Define a plan and review it regularly as your situation and the market changes. 

2. Research, research, research

Understanding which property is going to work best for your situation is key. It needs to be one that will be of high demand for renters and, possibly, owner-occupiers down the track. Be sure to research which types of properties are in demand and rents quickly in particular areas, and those that don't. Is this an area popular with families who want three- or four-bedroom homes, or with singles looking for studio apartments? Speak with property managers and check ads to find out what renters are currently looking for, and how their needs may change in the future. What developments are planned nearby? Get to know the neighbourhood you are planning to invest in. 

3. Old or new?

It is an age-old debate: should you buy a renovator's delight or something you can rent straight away? It is great if it can be rented our as is, but potential to renovate should also be considered. The ability to easily and economically add value to a property is a plus, as it could increase rental returns. Don't immediately write off a property just because it needs a paint job or the kitchen cabinets need replacing, but at the same time avoid overcapitalising if it is not going to deliver returns. It is a balancing act, so consider your skill levels, the extend of the makeover required and your access to funds to pay for renovations. 

4. Location, location, location

Location is critical to performance. Some of the things to consider include:

  • How far is the property from the CBD or business areas?
  • Are there schools nearby?
  • How's the shopping? Can tenants walk to local shops or will they need to drive?
  • What and where are the public transport options?
  • What other amenities are close by? Are there cafes, a medical centre, a pharmacy, a gym?

5. Do your sums

Always check your finances before deciding to purchase a property. Get pre-approval and make sure you can cover repayments as well as extra upfront costs such as conveyancing, inspections and taxes. There are also ongoing costs to consider including landlord insurance, strata and property management fees, property maintenance, council rates and utilities. 

You need to set yourself a realistic picture of a property's cash flow, rather than a vague idea of whether rent will cover expenses, so use a spreadsheet to calculate all foreseeable expenses. If cash flow is negative, can you afford to maintain the property? What happens if it is vacant for a couple of months? Do your sums carefully and always ensure you factor in a financial buffer to avoid mortgage stress. 

6. Choose the right setup

When it comes to investing, it is important to understand how to set up the purchase to receive the most benefit. The entity should be tax-effective and protect any existing assets. You can purchase in your name, through your super or through a trust, but always understand how the purchase will affect you and your family. Expert advice can assist in maximising your benefits. 

7. Pick the right features

You want to appeal to the highest number of tenants, so look for properties that offer that little something extra, like a second bathroom or a lock-up garage. Also, look at properties that appeal to many segments. For example, a lift may appeal to both retirees and a young family, as both will be looking to avoid stairs. Just make sure the benefits outweigh any extra costs. 

8. Check your emotions at the door

Remember, you will not be living in this home, so there does not need to be an emotional connection to the home or the area. Your decision should always be about which property will give you the best return, not which one is most suited to your own tastes and lifestyle. 

9. Timing is key

It is a great idea to keep on top of the market's movements and its dynamics. While there are investment opportunities available most of the time, some market conditions are more favourable. Do plenty of research and, if you don't fully understand it, ask for help. 

10. Get expert advice

Your broker can put you in touch with experts when it comes to real estate and investment. This means accountants, real estate agents, lawyers and valuers. These people are immersed in the industry and will be able to guide you in your decision-making. 

 

finance

Happy New Year... or is it? Once the smoke of the Harbour Bridge fireworks has blown away, many of us are left feeling a little dusty, and not only from too much food and drink. For at the end of January, along with the tennis, comes credit-card bill shock - the unwelcome financial hangover from the Christmas and New Year festivities. 

Of course, it is best not to splurge on the plastic, but it is not always easy to resist spending more than you should on putting extra sparkle into the family holidays. So, if you are facing a credit crunch, why not make a New Year's resolution to get your finances in order. 

Tick all three boxes on our money-wise checklist and you will be able to look forward to a more prosperous 2019. 

Check your super

How is your super fund performing? What fees are you paying? Are your investments aligned with your ethics... are they high or low risk? There are a few super comparison websites out there, but don't just click on one. As well as your investments' overall performance, there are plenty of other services and insurance options to take into consideration. Also, remember to consolidate any old accounts you may have lurking out there. You can track your old super online using the ATO's MyGov service. 

Check your insurance

While home, contents and car insurance are essentials, many people don't look further to other forms of cover - those that can protect your family if you face a catastrophic change in your health or circumstances. As well as a good level of life insurance, it is prudent to consider income protection that will protect you through critical illness as well as cover for total permanent disability. 

Consolidate debt

If you have equity in your home, there is no reason to pay the high interest rates charged by most credit card providers. In these times of low inflation and low wage growth, interest rates are likely to remain at record lows right through the next 12 months and beyond. By consolidating all your debts onto your home loan, you could save thousands of dollars and become debt-free faster. 

At each stage of your check-list, it is important to talk to the professionals. That is where the Zippy Financial team can help. Thanks to our team of experts, we can give you all the advice you need: mortgage, insurance and financial planning. If you want to start 2019 on a firm financial footing, make it your New Year resolution to give Zippy Financial a call. 

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Contact Details

Zippy Finance 

PO Box 3078
North Turramurra
NSW 2074

T 1300 855 022 

Louisa Sanghera is a credit representative (437236) of BLSSA Pty Ltd ACN 117 651 760.  Australian Credit Licence 391237. ABN 85 168 278 975.

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