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.