Investment Property

The use of property as an investment vehicle is viewed by many Australians as the 'Holy Grail' of a personal investment strategy, yet many people neglect to follow the basic rules that should govern any investment decision.

So what are these rules? And how do they apply to property investment?

1) Leave your emotions at the door - because of the tangible nature of property it often has the ability to evoke strong emotions within investors.

These emotions can have the effect of clouding the ability to determine the true investment value of the property and can lead to an impulse decision. Decisions made in this manner often do not have the desired outcome.

You should always be looking to buy an investment based on the numbers, and the numbers alone. Too many mum & dad investors get caught up in what colour the carpets are, the type of curtains in the kitchen etc.

When buying an investment property it is imperative to base your decision purely on the numbers. If the numbers work, then you have yourself a deal.

2) Do your research - Would you purchase shares on the stock exchange (valued in the 100's of thousands) without knowing the companies past performance, future opportunities and income earning potential? The answer is of course - No. So before buying an investment property do some thorough research, here are a few things to look our for:

• Property growth values in your region. (these can be obtained easily through the valuer-generals office in your state)
• Potential to easily increase the value of your investment (e.g. buy the worst home in the best street and give it a splash of paint, weed the garden - make sure that this process doesn't cost more than the expected increase in value).
• Look at rental values in the area you are looking to purchase (you can get a good feel for this by looking at the "for rent" section of your local newspaper.
• Its important to keep in mind that you may not be able to keep your property rented out for the entire year - so when working out the annual return make sure you account for a month or so of no income.
• What are the costs associated with the property? E.g. council rates, strata-title levies, water, other costs (e.g. annual maintenance)

3) Determine how you are going to purchase the investment

Will the money come from savings or will you have to borrow? If so, how much will you have to borrow? How much will the repayments be? You should always want to maximise your investment debt and reduce your personal debt first!

Why ? Because your getting good tax benefits by having the investment debt, whereas you are not benefiting at all from your personal debt. I also advise you to keep your investment debt on an interest only loan until you have reduced all of your personal debt.

Once you've followed these basic rules, you will be in a much better position to make a decision about your investment property and you'll have a greater chance of getting the results you desire.

In future reports I'll go into property investment on a much more detailed basis and include information on things such as loan structures for property investment, building equity in your home and long term strategies for building your property empire...

If You would like to be shown how to structure your investment loans, how much you can borrow and what your repayments will be on your investment debt, simply send me an email asking for a No Obligation FREE Quote Now!