Property investment in NSW FAQ's
What is an investment property?
An investment property is a property purchased for investment purposes, either through rental income or to resell. There are three types:
1. Commercial property investment - covers any type of property that a business operation would use, whether it is an office, retail, or industrial space.
2. Mixed use - a mixed use property can be used for both residential and commercial purposes. For example, an apartment building with retail on the ground floor.
3. Residential property - can be single family homes, apartments, townhouses or other types of residential structures.
What are the different ways to invest in property?
Buying an apartment - an apartment can be cheaper to buy than a house, and the owner's corporation usually takes care of building maintenance. They usually come with strata fees and less discretion over adjustments due to the body corporate.
Purchasing a house - houses have higher capital growth potential than apartments. Houses often have larger lots, longer leases, and can provide excellent long-term capital gains.
Buying a new property - a key bonus when buying a new property as an investment is the ability you have to claim full depreciation on both the ‘plant and equipment’ and the ‘capital works’. Investors benefit from increased overall base tax deductions and lower maintenance expenses with new buildings.
Can I buy an investment property with my superannuation?
Yes, you can, but there are some tight guidelines:
- Only self-managed super funds can buy property investment.
- The investment property must serve the fund member as its primary objective (s).
- It cannot be inherited.
- It cannot be inhabited by a fund member or their relatives (s).
- It cannot be rented by a fund member or their relatives (s).
- If you invest in a commercial property, you can lease it to a fund member, but it must be at the market rate.
Buying an investment property with superannuation also involves fees such as legal, bank, upfront, and advice fees.
How do I research the property market?
It's important to understand the market's supply and demand, as well as demographic and economic trends, as well as planned infrastructure and improvements. There are many websites that can assist you understand market indicators such as average property prices and capital growth:
- Australian Property Monitors
- Australian Bureau of Statistics
- SQM Research
Talk to local real estate agents, developers, and managers. Visit the neighbourhood to get a feel for the suburb, the people that live there, and the sought-after location qualities.
What location features should I look for when investing in property?
Location is important in property investment. Consider the type of renter you want and the best location to attract them. You should also consider proximity to public transport and major roads, access to cafes, and other amenities, school catchment, parks, beaches, and other lifestyle opportunities, crime rate, developments and streetscapes.
How do I determine the right rental price?
When setting the rental rate, it is important to be competitive in order to attract high-quality tenants. Get a rental appraisal from your local property manager to figure out the suitable rent. They know how much similar properties rent for and what you can do to either improve value or appeal to a higher paying tenant.
Examine the area's median rental pricing and the property's features and type. Know the area's rental demand and consider your expenses. Remember that rentals fluctuate year to year, so schedule an annual rental appraisal with your property manager to ensure your property is working hard for you.
What are rental yields and how to improve them?
The rental yield is the return on an investment property - the difference between your rental income and expenses. It is rent multiplied by 52 weeks divided by purchase price equals rental yield. If you want to improve your yields, the following could help:
· New paint
· Clean the garden
· Fix the floor
· Update your kitchen
· Refresh the toilet
· Add desirable features like air conditioning, dishwasher, internal laundry, and shutters.
· Built-ins and storage
· A parking spot
· Property safety
For more insight into how improve your rental yield download our property investing eBook
What are investment property tax deductions?
The ATO offers property investors several tax benefits, including:
- Property management fees
- Landlord insurance
- Advertising expenses
- Interest on your investment loan. You cannot claim principal sum repayments or refinanced loans.
- Land tax and council rate deductions (when the home was inhabited)
- If your property was after September 16, 1987, you can claim building depreciation and depreciation on some installed appliances
- Maintenance and repair costs directly related to wear and tear
What are the benefits of using a property manager?
By working with a property manager, renters will be better screened, with references checked and interviews conducted as needed. DiJones matches tenants to properties based on their appropriateness and the landlord's requirements. They operate as a liaison between you and your tenants. Tenants can reach them 24/7, so you don't have to; and property managers collect rent from renters who are late. Property managers know the property market and are aware of new regulations that may affect your home, and they can help you choose the best price for your home to maximise your return.
How can a property manager add value to your investment?
A good property manager will identify quality renters who will stay for the entire term and keep the property in good condition. This will spare you the hassle of constantly relisting your home. They'll keep the property well-maintained by inspecting it regularly and addressing requests for repairs or upkeep, resulting in better tenants. They can advise you on how to upgrade your property to increase your rent or long-term capital growth. And they can provide regular inspections to identify future maintenance issues, saving you money in the long run.
How should I review my property investment’s performance?
Most investors want to maximise their property investment returns. The first step is to assess your present investment's performance. With this knowledge, you can improve your strategy. Questions to ask to assess your property's current performance and identify areas for improvement include:
- Are you charging the proper rent?
- Does your property match the market conditions?
- Are you targeting the right renter?
- Review your investment loan. With interest rates at historic lows, ask your lender about reducing your interest or fees.
- Are all relevant costs claimed?
- Are you insured?
What are the benefits of getting an annual property appraisal and strategy session?
As an investor, you want to maximise your returns so all DiJones clients receive an annual strategy session. Our property managers will do a full rental appraisal. They'll research the local rental market to make sure you're charging fair rent. They will look for ways to improve the value and appeal of your property and advise you on how to improve your capital growth. They will also help you save money and work with your accountant to maximise your tax deductions.
To organise a property appraisal and a investment review click here
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