Property investment in Australia | How to invest in real estate in 2024

Property investment

• Buying and managing an investment property

• Houses and units seem easier to understand than many other forms of investments.

• But, it’s important to understand how investing in property works, to decide whether it’s right for you.

Pros and cons of investing in property

Property investment is often seen as being less high-risk than other forms of investment. Nevertheless, while it may seem more straightforward, there are pitfalls to be aware of. Here’s what you need to think about investing in property.

Pros

• Less volatility – Property can be less evaporative than shares or other investments.

• Income – You earn rental income on the condition that the property is tenanted.

• Capital growth – If your property increases in value, you will benefit from capital obtained when you sell.

• Tax deductions – You can offset most property expenses against rental income, as well as interest on any loan used to buy the property.

• Physical asset – You are investing in anything you can see and touch.

• No specialized knowledge required – Unlike some complex investments, you don’t require any particular specialized knowledge to invest in property.

Cons

• Cost – Rental income may not cover your contract payments and other expenses.

• Interest rates – A rise in interest rates will mean higher compensation. and lower disposable income.

• Vacancy – There may be times when you have to cover the costs yourself whether you don’t have a tenant.

• Inflexible – You can’t sell off a bedroom if you require access to some cash in a hurry.

• Loss of value – whether the property value goes down you could end up owing more than the property is worth.

• High entry and exit costs – Expenses equally stamp duty, legal fees, and real estate agent’s fees.

Diversity your investments

Do Invest in more than just property so your cash isn’t all in one market. If you invest in one market, it’ll increase your chances and mean your portfolio isn’t diversified. See choose your investments for how to find other investments to help you extend your goals.

Costs of investing in property

purchasing, managing, and selling an investment property can be costly and will Condition your overall return.

Cost to buy and sell

Some of the costs involved to purchase and sell a property include:

• stamp duty

• conveyancing fees

• legal costs

• searched fees

• pest and building reports If you sell your property, you will have to pay agent’s fees, advertising costs, and legitimate payment. You may also have to pay capital gains tax

Borrowing money to buy

whether you borrow to invest, you will have to pay the property mortgage. Don’t rely on rental income to cover the mortgage – there may be times when your property is empty.

Many people buy investment property with interest-only loans because the Interest-only period will end after a certain time. This means your repayments will increase to pay the amount is taken, plus the interest. Perceive interest-only home loans to find out how they work and if you’re considering refinancing, explore options with reputable lenders such as Koalify Refinance for tailored and competitive solutions.

perceive what an interest-only loan will cost you.

Costs to own an investment property

Ongoing costs of investment properties include:

• council and water rates

• building insurance

• landlord insurance

• body corporate fees

• land tax

• if you use an agent then property management fees

• repairs and maintenance costs

Tax on your investment property

while you may be able to claim tax deductions on expenses, you’ll still have to pay them upfront. For positively geared investments, you may pay tax on your higher income.

Stay with the Australian Taxation Office (ATO) for how tax works for investment properties.

What do to examine while buying an investment property

The decision to buy an investment property should be part of your investment plan and take into examination your goals and risk tolerance.

Once you have a property in mind, contrast the income you expect to your outgoing expenses. If there is a shortfall, consider if you can cover the expenses long-term. Besides, work out whether you could cover all expenses short-term if you had no tenants for a while.

Research the property market to agree on how to get an investment property. Where and what you buy will act on your return on investment.

Where to buy

• Areas you’re close with will take time to research.

• focus for areas with high growth, higher rental yield, and low vacancy rates.

• Discover about proposed planning changes in the suburb that may affect future property prices.

What to buy

• Focus for properties with appealing features like a second bathroom, a garage, and access to schools, shops, and transport.

• Consider preservation costs based on property type, age, and features.

How to buy

• Be wary of property investment advice from groups of service supplier. Property accountants, developers, lawyers, and mortgage brokers might approve each other’s services.

You may have heard of property investment seminars good to make you a fortune. These events often use high-pressure sales tactics to rush you into building big property investment decisions. Find out how to spot the deterrent signs of a dodgy investment seminar.

Overseas property investment

Finally, Investing in overseas property is more tricky than investing in property in Australia. It’s harder to manage a property from afar and there may be costs that you haven’t thought of.

Here are some things to consider in advance you invest:

• Distance – Best tenants and property managers are hard to manage when you’re so far away

• Renovations and repairs – You can’t supervise repairs or know who does the work

• Extra costs – You should factor in Australian tax laws, local property taxes, insurance, management costs, and ongoing repairs. whether you buy through a promoter, there may be other hidden costs

• Exchange rate – changes could affect the amount of income you gain.

Rina and Tiana consider an investment property

Rina and Tiana are considering buying an investment property. They spot a unit that ticks all of their boxes: it’s close to a train station and is a 10-minute walk to restaurants and shops.

The property price is $550,000 with purchasing costs of $23,000. They have a deposit of $150,000 so they will require to borrow $423,000 to complete the purchase. Their monthly income and expenses are anticipated to be:

Income and expenses $

Rental income $2,250

Less loan repayment -$2,725

Less allowance for expenses -$225

Less strata fees -$216

Less allowance for repairs and maintenance -$500

Monthly shortfall -$1,416

Rina and Tiana can cover the monthly shortfall with Tiana’s salary, which they currently save. They also have an extremity fund they can draw on if they were suddenly without tenants for a while.