Do you want to make more money? We’re pretty sure not many people will say no to that one.
There are fairly simple ways to aid you in increasing your long term wealth and give you the financial stability you have always wanted. The Australian property market has helped people realise this dream for generations and could just be the smartest and stress free way to get you there.
Investing in property does not give you instant gains like a Lottery win nor is it as slow as saving those copper coins your grandfather gave you but it can yield strong generous returns by playing the long game.
That being said the long game has paid off for many households because as at August 2016 there were over 600 suburbs in Australia that now hold a median house price that exceeds $1million. Now that’s a pretty elite club in anyone’s language. Real estate in Sydney dominated the top 20 list of most expensive homes, accounting for 17 of the coveted spots.
Location is EVERYTHING!
Don’t buy emotionally! Sometimes that cute little cottage that is on 10 acres with room for the chickens to roam that is just oh so perfect may not be better than the dilapidated house 2 minutes from a bus stop and shopping centre that needs a little time spent fixing it up. The fixer-upper has fast become a favourite amongst budding property investors and with a lot of research and planning can definitely pay short term and long term dividends.
Deciding on where to buy your property is just like planting a fruit tree; ground with rich nourishing soil will grow far better than the one in the drought stricken desert. Not all areas perform on a level playing field so always make a decision based on knowledge and research.
I look at a data over a 10 year period to help with the decision making by looking at the suburbs with high profit sales and go back 10 years to compare them so that you have a start point to calculate the growth, then work out and compare to the surrounding suburbs as you may just stumble onto the next boom suburb by doing your homework. It’s called the ripple effect. As one suburb becomes too expensive for buyers they tend to spill over into the surrounding suburbs as a compromise. The trick is staying ahead of the ripple.
If you have managed to find the area that you want to invest your hard earned money into and it fits the budget (that’s where we are here to help you make it work!), study the local council development reports and plans and look for any major developments or changes proposed in your area that could affect the value and return on investment for your property.
This can be in a good or bad way such as a high speed railway going in on your back fence may not see tenants wanting to renew their lease because of that annoying 4:15am express train or a new school proposed two streets away which will see family’s flock to the area safe guard your occupancy rates.
Give it a little Jazz
So you’ve done all the research and made the educated decision and have purchased that diamond in the rough. Now, surely it’s time to put your feet up and watch that property grow in value? NO!
Sometimes if you have bought in the next up and coming area the market may be slightly slower for finding the perfect tenant, luckily enough it’s not very hard to make your house really pop on the rental advertisements.
A Report by senior economist Michael Workman of the Commonwealth Bank has said that home renovation spending is predicted to top $32 billion in 2016 alone or 36% of total residential spending (More on this topic next time). And this is for a really good reason as this can add a major value to your investment and if it’s a rental property, talk with your accountant as there could be some tax benefits in store for you too.
Some of the biggest bang for buck improvements can be:
A lick of paint (inside and out)
Adding an extra bedroom or bathroom
Freshening up the kitchen
Tidying gardens and lawns
Updating the front façade and giving some street appeal
Having an outdoor entertaining area
Adding a granny flat
Some of these improvements will be far cheaper than others, some you need professionals for and some you can do yourself but what they all have in common is that they can increase the value of your investment.
Knock knock, who’s there…
So who’s going to be living in your future nest egg? There is so much to consider when it comes to choosing the right tenant to be the custodian of your investment.
Now those little improvements that you made may have enabled you to increase your rent but what’s more they will help attract the right tenant.
If you are doing this yourself then notes are key, especially during the screening process of potential renters as those parents that didn’t care that their children were pulling your curtains down and slamming the doors or the couple who’s application states that they were non-smokers but have a strong smell of cigarettes may look great on paper but they may not be the right fit for you so make notes about everyone who enquires and don’t just rely on your memory. You can start with a standard list of questions for the tenants to answer that are important to you. This could be around their job security, income, previous tenancy reference. There are plenty of helpful tips and form available online regarding this, including a tenant’s register to find out if they have shown poor form on a previous rental agreement.
If looking after your own investment property isn’t for you then finding a great property manager is the next step. They can advertise for tenants, vet the tenants and help you select the right tenant for your home, collect bond and rent payments, conduct property inspections and deal with any repairs or maintenance that is required. But just like finding a tenant make sure you interview your property managers also because they will become the gate keeper for your investment. A good property manager is worth their weight in gold and can save you from the day to day headaches of dealing with regulations and rules around having a tenant in your investment property.
So Here’s Our Pitch
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Article written by Brett Ginn – Home Loan Specialist at Ask4Finance