Presales Condos & Pre-Construction Real Estate




Friday, April 27, 2007

8 Top Tips for New Real Estate Investors

As a relatively stable interest rates outlook and tight rental markets begin to tempt more real estate investors into the market, broker Mortgage Choice has released the following tips for would-be investors in the Australian Property Investor magazine April 2007 edition.



1. Create a long-term property portfolio plan
Understand that property investing is a long-term strategy and that property cycles generally involve highs, lows, and steady patches over seven to ten years. Consider your real estate investing goals and all possible outcomes.

2. Consider all costs and tax implications
The interest and related expenses you incur on your property investment (such as repairs and maintenance) are tax deductible. Some properties may be negatively geared (where your loan repayments, fees and other costs exceed your rental income), meaning the net loss can be offset against your other income. Others may be positively geared, meaning the rental income is higher than the costs. Also think about the capital gains tax you’ll have to pay if you decide to sell the property.

3. Research, research, research
Read articles, use reputable property research companies, and the Real Estate Institute of Australia, search the internet and talk to people to research the areas you’re interested in buying in. Invest the time to fully understand the real estate market – it could save you thousands.

4. Consider using your equity
You can tap into your home equity or equity in another investment property as a launching pad into more property, so long as you can afford the extra repayments.

5. Think about buying with others
More and more Australians grappling with affordability issues are pooling their resources with friends, family or work colleagues to break into the property market or increase their property ‘wealth’. There are a myriad of home loan options now available for such situations, though you’ll also need to get legal advice to set up a contract with your co-buyers.

6. Choose a loan to meet your current needs
Apply for a loan that suits your current needs and lifestyle, as you can refinance down the track.

7. Use a buyers agent
A buyers agent or property finder can provide advice about the best property real estate for you. Buyer agents know the real estate market better than most and can help you choose and buy your property.

8. Visit a financial adviser or accountant
You need to discuss your full monetary situation with an experienced adviser to be sure an investment property is right for your situation.

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posted by hattrick @ 9:21 AM  

1 Comments:

  • At April 27, 2007 9:45 AM , Blogger hattrick said...

    Retirement Planning – Caution needed on rush to super
    Real estate investors should think carefully rather than rushing to sell their properties in order to take advantage of new superannuation laws, a property expert has advised for the API Magazine.

    Property Wizards buyers agent Liz Sterzel said only a select group of property owners would be better off selling property to invest the proceeds in super before the middle of the year. The legislative changes allow people to inject up to $1 million into their super fund this financial year.

    Sterzel said for some real estate investors selling property to put the proceeds into super would set them back decades. “If, based on these changes, investment property owners are tempted to sell up to pay out the mortgage, the capital gains tax and put the remaining cash into superannuation, they could be making the biggest mistake of their lives and cheat themselves out of a comfortable retirement,” she said.

    Sterzel said she’d run through many scenarios involving a full range of interest rates, equity, income and property growth rates, and retaining the real estate property was almost always the best option. “For example, say you bought an investment property three years ago for $300,000, which is now worth $500,000 and is growing at 8 per cent a year, that’s a growth of $40,000 each year,” she said.

    “Let’s say you owe the bank $350,000, so if you sell the property you’re left with $150,000 but after deducting agent fees and capital gains tax, you would end up with around $100,000 cash to invest in super. If your $100,000 in super was put into another investment that also grows at 8 per cent a year, your money will only grow at $8000 per year, rather than the $40,000 you were earning in the property investment.

    “If you sell that property investment after five to ten years, allowing for all cash flows, taxes and the tax-free benefits of super, you’ll still end up with just 50 to 65 per cent of the cash that you would have had, had you kept the geared investment property.”

    Sterzel added her figures were illustrative and individuals facing this decision should consult a tax or financial advisor.

     

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