When property will work – and when it won’t! Quick tips for property investment

Welcome to Finance and Fury

• Quick tips to help with making successful investments in property
• When property will work – and when it won’t!
• It is two-fold – How well the property works, and then what your own personal situation is like as well

Situations that will work – essentially, doing well in property compared to not doing well

Property

1. Paying fair value or undervalue for the property – The first step is making sure that you don’t lose from the get go
   • Don’t overpay – New builds can have the FHOG built in
   • Or at least pay the fair value in an area that will grow
   • Remember for a place where land values will go up – The property price will technically go down (remember to watch out for maintenance costs)
2. Potential zoning and subdivision – future capabilities of the property
   • What is the ability to increase prices?
   • Zoning – growth of land value from high density zoning
   • What are the limits on your ability to change the property?
3. What is the ability to increase yields?
   • Sub division – 2 incomes for one
   • Duel occupancy

Your situation

1. Stable cash flows – Don’t get caught out
   • The ability to have long term ownership and maintain payments is important
2. Can hold for the long term
   • Future plans are important – Property is great for growth – But you have to wait
3. Limit your outgoing – $50 or $100 p/w – Don’t get in a hole
   • The worst case is to be in a position you are paying more than you earn long term

Situation that won’t work!

The property

1. The hidden costs – the things that kill the profitability of property
   • Sinking Funds/Body corporates – Seen $6,000 on a place renting for $28,600
2. Leveraging too high
   1. Price declines can lead to banks increasing your repayments – LVR too high
   2. Interest rate rises – too much debt against value = Bad yields
      • Repayments may be unaffordable if too much debt and rent declines

Your situation

1. Family/income situation changing
   • Maternity leave or starting a family – Additional costs plus lower incomes
   • Needing to buy a new home for yourself – bank may not lend if existing investment debt
2. Property is a wealth trap
   • Worst property in best street is a good buy – but not if it is going to cost $300,000 to make it habitable
   • Title searches – Flood zones, major highways (Moving to Brisbane, places in Kenmore)
3. Negatively geared – with no income to offset or low marginal tax rates
   • MTR of 21% means that 79% is being lost
4. Loan or ownership structure incorrect
   • Joint owned but one person has no assessable income – bad for deductibility

Thanks for listening!