If you’re thinking of investing in residential property in South East Queensland, it pays to do as much planning and research as you can before you commit to anything.
While Australia’s growing population and a continuing shortage of rental properties mean that building residential property is often a good investment choice, you can still get more from your investment with some clever decision making in the early stages.
We asked the GW Homes investment property team to give us their ideas for getting more from an investment home
. Here’s what they shared with us.
1. Choose to invest in the right property at the right price
Obviously, you’ll want to achieve capital growth for your asset over time, as well as a good rental return in the meantime. This means it’s crucial to buy at the right price and invest in a property that has a good chance of increasing in value.
That’s where the decision to build an investment property, rather than buy a home, can be crucial. You could find you’ll have more control over your purchase costs by choosing to build an investment home, rather than buying an existing property.
Another point worth considering is whether the property you're thinking of building or buying is a match for the demographics of likely renters in the suburb.
For example, if you’re investing in a suburb near a uni, a rental property with more bedrooms will be in greater demand than one with a big kid-friendly backyard. On the other hand, if you want to attract families, a rental home that’s close to parks and schools in a quiet street will fit the bill.
2. Make sure you understand negative gearing
As a property investor, you may be able to benefit from negative gearing to reduce your amount of tax payable. Simply put, if the borrowing and maintenance costs you incur to maintain your investment property exceed the money you make from it, negative gearing allows you to deduct this loss from your total income.
This means that when you make an actual loss on your investment property, you can use that loss to reduce the amount of tax payable on your other earnings. Ask your financial adviser for more information about negative gearing.
3. Make use of your home equity to invest in property
One effective way to buy an investment property is to leverage the equity you’ve earned in your home or other property.
Equity is the difference between what your home is worth, and how much you owe on the mortgage. For example, if your home is valued at $650,000 and your remaining mortgage balance is $300,000, this means you have $350,000 of equity in your home.
By using the equity you have in your current home you may be able to borrow more funds against your investment home, potentially increasing your tax deductions through negative gearing.
4. Make sure your investment property is attractive to tenants
To minimise the amount of time your investment property is untenanted – as well as to attract good quality tenants – it’s important to invest in a well-presented property that’s designed around the needs of tenants.
There are many little decisions you can make in the build stages of your investment property, to give the finished home the best chance of attracting tenants. Neutral tones on walls and floors, hard wearing floor coverings, and solid kitchen and bathroom fittings all have a part to play.
One way to assess a potential investment property is to put yourself in the tenants’ shoes, and ask yourself, “Would I be happy to live in this property myself?” If the answer is ‘no’ or ‘hmmm... maybe!’, then it’s probably worthwhile re-thinking your investment decision.
Again, you could find that it’s easier to achieve “tenant friendliness” with a purpose-built investment property than it is with the compromises that come with buying a pre-existing home.
5. Find a capable property manager for your investment
To help you manage your tenants and get the best possible rental return from your property, it’s a very good idea to engage a proficient property manager.
Your property manager will help you find the right tenants for the market, carry out reference checks, and make sure they ensure optimal cash flow. They’ll also perform regular inspections of your property, and take care of any maintenance issues your tenants report or that your property manager discovers.
A good property manager will even have the know-how to help you decide when you should review your rent and when you shouldn’t. What’s more, the fees you pay your property manager are tax deductible. That has to be a far better option than the stress and effort of trying to manage your investment property yourself.
GW Homes is proud to recommend the property management services of our sister company Running Property
. Their experienced property managers have the knowledge and proficiency to help you get the best return from your asset.
6. Take a long-term view to investing in property
Before you commit to building a Brisbane investment property
, bear in mind that property is a long-term investment. You can’t rely on property prices increasing immediately – instead, try to build up equity in your investment property over the years.
Also, unlike other investments such as cash, managed funds, or shares, you won’t be able to simply sell part of your investment property if you need access to your money. This also points to the long-term nature of investing in property.
Talk to GW Homes about building an investment home
As one of South East Queensland’s best-known builders, GW Homes have built hundreds of owner occupier and investment homes. Our experienced team have the know-how to help you make the right decisions when building your investment property.
To find out how you can leverage GW Homes’ expertise to build your investment property, call 3393 1399 or fill out the contact form here.