Buying an Investment Property
Stage 1: Do Your Sums
The first step towards buying an investment property involves a little self-examination. You need to assess the impact of the investment property on your cash flow.
This is very important because you need to consider the additional cost of owning an investment such as:
- Loan repayment
- Rental manager fees
- Insurance – both property and landlord
- Body Corporate/Strata Fees
- Repairs and maintenance
- Accountant fees
- Rates and taxes
- Land tax
You also need to make sure that you can afford to hold onto any property you buy. In other words, how much rental income your property is going to generate and will it be enough to cover your rental property related expenses?
If not, can you manage any shortfall?
Don’t forget to account for any contingencies, such as extended vacancy periods or unexpected maintenance costs.
Make yourself aware of taxes involved in property investing and add these into your calculations.
By underestimating your income and overestimating your expenses you’re more likely to avoid any nasty surprises.
Advice from your accountant is vital in this regard as these can change over time. Stamp Duty, Capital Gains Tax and Land Tax all need to be taken into account. Remember that interest rates can vary over time but the good news for property investors is that in times of rising interest rates you can normally expect to be able to increase the rent.
We’re here to help you
Dealing with banks can be a stressful experience but rest assured that our mortgage broker based in Glenelg (but our mortgage broker services the entire Adelaide Metropolitan area) can help you make the right decision about your mortgage. We will guide you at every stage of your loan process.
Contact us on 08 8376 0455 or drop into our office at 593 Anzac Highway, Glenelg SA 5045.
Any advice contained in this article is of a general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regard to those matters. Information in this article is correct as of the date of publication and is subject to change.