So you’ve been thinking of investing in a property? The property market has been booming over the past few years, and the Surf Coast has seen some incredible growth. With it’s proximity to Geelong and Melbourne it is a popular place for investment, however as with any investment there are always things to think about before taking the plunge. Here are five mistakes to avoid when buying an investment property…
1. Not doing your research
When purchasing an investment property, it’s important to do your research about the location, local amenities, rental yields, vacancy rates and the property itself. You should aim to know as much as you can about the neighbourhood you intend to invest in. Be wary of ‘booming markets’ such as mining towns and tourism centres. These may produce excellent returns over the short term, but how will the investment stack up long term if there is an industry downturn? Remember, a good investment is not one based on speculation.
2. Not having a professional property manager in place
Many people assume property management is simple and think they can do it all when it comes to taking care of every aspect when managing their property. This can quickly become a stressful and tedious task, not to mention the ever increasing legislative requirements that fall upon landlords – it might even start to feel like another job! A professional property manager can take care of everything, from advertising the property, screening potential tenants, filling the vacancy quickly, conducting regular inspections and answering tenant requests for maintenance and repairs, amongst other services. A good property manager will give you peace of mind and keep everything running smoothly – if that isn’t the case, find yourself a new one. Too many investors make the mistake of keeping a poor property manager on for far longer than they should. Learn more about what makes a good property manager here.
3. Forgetting about tax benefits
Noel Whittaker says “the golden rule is that you always invest off the strength of the investment alone – any tax benefits that go with it should be regarded as icing on the cake”. However, you should be very aware of what you can claim come tax time. By not taking advantage of tax deductions, you could miss out on hundreds or even thousands of dollars in potential returns. Ensure you have tax depreciation done – even with existing properties there are claims to be made. Another benefit of having a property management team in place is that they record all expenses and outgoings for your tax purposes. Get yourself a good accountant who can assist you with this.
4. Know your numbers
As with any property purchase, the figures can quickly start to add up. While you need to factor in normal costs associated with buying such as stamp duty, conveyancing, council rates and building and pest inspections, it’s vital to also account for all the extras that come with property investment. This includes but is not limited to maintenance and refurbishment costs, landlord protection insurance, home insurance and body corporate fees if applicable. Older properties will generally require some immediate maintenance, as things always seem to go wrong in the first few months, so allow for the cost of a few repairs when considering your budget. Ensure you allow for two weeks of vacancy per year. If you price your property to the market, it won’t stay vacant for an extended period of time. Have a financial contingency plan in place in case rental returns drop or you need to sell. It’s always smart to underestimate your incoming funds and overestimate your outgoing expenses to avoid an unpleasant surprise when the accounts are finalised each year.
5. Focus on the long-term
Some people treat property investment as a ‘get rich quick scheme’, and in the booming market that we’ve seen over the past few years, some have got lucky, however this is not always the case. Generally speaking, the longer you hold onto a property, the better your chance at reaping a greater profit. If you’re planning on values rising in a few short years so that you can sell your property at a large profit, you are speculating rather than investing and may be disappointed come sale time.
If you would like any further assistance with looking for an investment property on the Surf Coast, or you have an investment property in Torquay, Jan Juc, Bellbrae or Breamlea that you would like to put in great hands, please call our office on 5261 4711 and we’d be happy to assist.