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
- 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)
- 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?
- What is the ability to increase yields?
- Sub division – 2 incomes for one
- Duel occupancy
- Stable cash flows – Don’t get caught out
- The ability to have long term ownership and maintain payments is important
- Can hold for the long term
- Future plans are important – Property is great for growth – But you have to wait
- 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 hidden costs – the things that kill the profitability of property
- Sinking Funds/Body corporates – Seen $6,000 on a place renting for $28,600
- Leveraging too high
- Price declines can lead to banks increasing your repayments – LVR too high
- Interest rate rises – too much debt against value = Bad yields
- Repayments may be unaffordable if too much debt and rent declines
- 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
- 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)
- Negatively geared – with no income to offset or low marginal tax rates
- MTR of 21% means that 79% is being lost
- Loan or ownership structure incorrect
- Joint owned but one person has no assessable income – bad for deductibility
Thanks for listening!