Things to thing about when thinking about investing in property
by James GerrardWed Feb 5 2014
The Sydney property market rose by 14.5% in 2013 and the average growth for all capital cities in Australia was 10%.
Over the past 2 years we have seen an increase in interest in direct property investment from our clients and it has been enjoyable working through the challenges of purchasing an investment property optimally.
There are several considerations that must be worked through before purchasing property as an investment.
They include:
Structure – Is the property purchased in a personal name, through a trust, through a company or via a self managed super fund
Funding – Do we use cash to purchase the property, redraw of equity from an existing property and/or borrowing again the new property
Level of debt – If borrowing is used, what level of borrowing is appropriate
Cash flow – Work through the ongoing cost to maintain the investment property if borrowings are used and property outgoings are greater than inflows of rent
Tax benefits – If gearing is used and the property creates an income loss, there may be negative gearing benefits that should be considered
Land tax – Different ownership structures have different land tax thresholds which can be thousands more or less each year paid in land tax
Location – Do we buy in Sydney or another capital city around Australia. And if in Sydney, what part of Sydney do we buy?
Type of property – Should we buy a house vs apartment
Yield – We try to target at least a 5% gross rental yield and if we have an income specific strategy, we aim to achieve 8% gross rental yield through a dual income property strategy
Capital growth – Looking at historical growth rates for different suburbs and form a view about future potential capital growth on the suburb
As can be seen above, there are a number of factors that potential property investors should take into account and expert financial advice is generally recommended. If you would like to speak with us regarding how to accumulate wealth via property, please make an obligation free appointment with us.