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At Yellow Brick Road Maroochydore we know there are many great reasons to own investment property: you might want an asset for retirement, you might wish to rent where you live and own a property elsewhere, or property might be your choice of wealth-creation. Regardless of your reasons, there are a few things you should keep in mind:
- GOAL: be clear about what you want to achieve, and by when. Before you buy a property, you should decide on your earning goals: will this be a negatively or positively geared investment? Will you invest in renovations to increase your rental return?
- BUDGET: write detailed plans about what funds you have available to spend, how much you will need to borrow, and what those borrowings will cost. Make sure you include the cost of renovating, repairs and maintenance as well as the predicted costs of management, insurance and rates. And then calculate rental income. If you need help calculating your budget, make an appointment with one of our friendly advisers at Yellow Brick Road Maroochydore today.
- RESEARCH: Do your research before you buy a property. Go to real estate agencies in the area and pick up their ‘for rent’ sheets. See what rents are being asked for what kind of properties. Ask agents what properties they would like to manage. Go to some open days. Get a sense of which agents are on their game.
- INSPECTIONS: if you’re buying a place to rent to others, basic things must be in working order that you might let slide if you lived there yourself. Always have an inspection done by a qualified expert.
- TAX ADVICE: don’t rely on barbecue chatter for your tax advice. If you intend to negatively gear your rental property, and claim the loss you make against your taxable income, then you should be advised by a solicitor or accountant like your local Yellow Brick Road Maroochydore mortgage broker or adviser.
- FIXED OR VARIABLE: budget a scenario for a fixed rate and a variable rate. Fixed rates are currently very low, and give you interest rate certainty for two, three or five years. But variable rates provide you with flexibility. Many lenders allow you to split your mortgage between fixed and variable. If you’re not sure what type of rate is best for you then make an appointment with your Yellow Brick Road mortgage broker as we can easily compare rates and find the best loan for your situation.
- RENOVATION: do your best to assess the renovation requirements before buying the property, and put these in your budget. Don’t get carried away with renovations – stay within your budget.
- INSURANCE: landlord insurance is imperative and you should contact a broker if the inclusions and exclusions confuse you. Renting property is a business and some of the features of landlord insurance might not be familiar. It’s key to get this right as it can save you in the long run if anything goes wrong, so make sure you speak with your local Yellow Brick Road adviser about property insurance.
- MANAGEMENT: there’s a clear choice. You either decide to manage the property yourself, doing basic maintenance and repairs. Or you use a managing agent who will charge a percentage of the rent. DIY managers of property can usually do the handiwork, but inexperienced owners usually stumble on tenant law and collecting rent.
Investing in property is an excellent way to build wealth, but it should be approached like a business. Have a goal, have a plan, stick to your budget and give us a call at our Yellow Brick Road Maroochydore branch so we can help you achieve your financial goals.