Investing in Property Professionally
Safeguard your Investment Success when investing in property is not dissimilar to having a successful business of any type. One of the most important fundamentals for any business to be successful is a good product, a sound business plan and then ongoing good management to implement the plan. And we're all aware the management of any type of business will need to manage their business through good times and hard times. It's the same with investing in property. Sound investment property advice would suggest your first step should be to assess whether you have incorporated basic money management fundamentals into your cash flow plan. See Smart Money Management If you feel comfortable with your cash flow and the affordability of oinvesting in property, then you can start determining what type of property investment strategy is going to suit your financial and/or personal skills situation. This is important as the options are numerous. The options for Investing in Property;
There are others with slight variations to the above, but these cover the major categories. You can gauge your potential success when considering investing in property for any of these different property categories by tailoring a property investment strategy to suit the individual category you choose. Because, you'll find there will be subtle differences for each of the above categories that may or may not be relevant to your individual financial profile. Additional investment property advice on this subject will be available once our successful property investment strategies section is completed. Planning Your Best Property Investment Strategy One of the important key's to maintaining ongoing affordability through different economic cycles is the purchase price when buying an investment property. That's because, you'll find as time goes by home loan interest rates will fluctuate and rental vacancy rates could increase. When starting out, the more comfortably your initial purchase fits into your available cash flow the less stress you'll have to endure. Good investment property advice is to learn to be patient, because if your first investment works out well for you, then you can always do another one. Any eventuality that increases interest rates or reduces your rental income will have an affect on the holding costs when buying investment properties. However, if you were astute enough when structuring your property investment strategy from the outset and you factored these likely outcomes into it from the start, then you will, in all likelihood be able to sail through any rough spots with little disruption to your finances. Planning Pays Dividends Especially when home loan interest rates cycles are low, because when interest rates go up, although they're tax deductible for investment properties, this is the one area that can impact the holding costs the most. There's little point of investing in a loser. So, it's important to put together a sound business plan when investing in property, regardless of your financial circumstances. But, we'd like to make it very clear with what we mean by buying an investment property within your affordability range. By that, we mean, when you're starting out, buy a lesser priced property that what you can afford, or what the banks are prepared to lend to you for. What are holding costs? Income from property investing normally comes from two sources, rental income and tax credits (also known as tax refunds). Rental income for most is self explanatory, a tax refund is derived from the tax deductions you accumulate when investing in property. Tax deductions for investing in property are obtained from things like mortgage interest, property expenses, loan costs, depreciation of the building and the fixtures and fittings. Also, there are other categories and there will be a more detailed analysis available investment property tax deductions section when it's constructed soon. Good investment property advice is, don't consider buying an investment without your eyes being wide open. There's plenty of investment spruikers out there, not only in property, but with any type of investment who will tell you everything you want to hear.
By doing your homework you'll avoid wearing long term pain! Again we stress it's important to review and diligently analyse your property investment strategy prior to implementation, because you can derive essential ongoing upside benefits by doing so. Your analysis should confirm to you, you have sufficient rent and tax refunds to cover all or most of the expenses and that the property is in a good location, so over time you'll also receive substantial capital growth. The optimum result would be to have a property investment that is positively cash flowed and has developed over time significant equity through capital growth, providing you with an investment in property that is not only increasing your month to month cash flow, but also increasing your net worth through sound capital growth.
Fail to Plan - Plan to Fail Where does one start when developing a property investment strategy? Well, that usually depends on individual financial circumstances. So, we'll take it from the beginning and then, you can slot in where you think it's appropriate for your situation. As mentioned previously when you're investing in property you should have a financial buffer available to you initially, in the event, less than desired financial circumstances present themselves. Such as higher home loan interest rates or extended rental vacancies occurring. In the event any of these circumstances eventuate, then the holding costs for your property investment can increase and the income from the property may not cover all of your expenses. This can result in having to dip into the household budget to make up the shortfall. Would you be able to afford to do this? In the near future we'll have an investment property calculator available on this site where you can input your personal data in order to see your weekly holding costs results for different price point properties. In the meantime, another good piece of investment property advice is you might like to use our free budget planner Go to Free Budget Planner to determine your cash flow position. This may give you reassurance as to whether you'll have excess funds available in the event your holding costs for your property investment increase. Knowledge Makes it Oh, So Much Easier When we say forgiving, it's not necessarily altogether totally forgiving, in the event of either the above two instances occurring. But, mortgage interest when investing in property is tax deductible. So, depending on your income tax bracket, part of the interest rate increase will be absorbed by the tax deduction. In the event of the loss of rental income it means your taxable income will be reduced and therefore the loss will be somewhat cushioned by having to pay less tax on a lower taxable income. Safe, Secure and Affordable And in order to increase and maintain your motivation it's worth keeping in mind that investing in property is an excellent focus for saving money and with a correctly structured property investment strategy it's the best medium to long term reliable wealth creation vehicle that many thousands of people before you have used to secure their financial futures. Getting Started Shouldn't be Too Difficult Keep in mind, when considering investing in property many can get started without necessarily having to pay any money out of their pockets, if they have sufficient equity in existing real estate. Even if you don't, there are still lenders who will lend up to 95% of the value of an investment property leaving the amount you have to contribute attainable for many who don't have existing equity. For those who think it might be all 'too hard', don't give up until you've at least explored our smart money management sector and its related web pages.Go to Smart Money Management You might find information there that will help you on your way. What's the Pay Off? Our example is calculated on today's economic environment where home loan interest rates are in the low 5 percents. So, after calculating cash in (rent and tax refunds) and cash out (property expenses and mortgage repayments) your weekly holding costs (your out of pocket contribution) for this property would be……..what's this?........nothing!..........in fact it's positively cash flowed $1 per week……..Interesting! Increasing Home Loan Interest Rates This $92.00 a week investment can be categorised as holding costs and annually at $92 a week this contribution would amount to $4,784 per annum. However, it's worth looking closer at the likely longer term outcome of this property investment strategy. If we factor in a modest capital growth rate of 5% per annum the property value in 10 years will be $618,980. Then, after factoring in and subtracting your initial purchase costs it will leave you with a gross gain of $223,000 plus. By the way, if during periods of low rental vacancy rates interest rates go up, you'll find the financial dynamics of the marketplace will encourage rental rates to go up also. This historically has always proven to be the case. In comparison, if you were to ongoing put the $92 a week into a savings account and you were able to get compounding interest of 6% per annum paid on your ongoing savings, then at the end of 10 years you would have saved approximately $65,000 including the interest earned. No comparison really, is there? It's also possible your property returns could be even higher if you choose carefully when buying an investment property. You might like to keep a look out for our hot property section and its associated pages which will be available in the near future for helpful information on high performance properties. Where's the Best Place to Start? But, resolving to do a budget that enables you to manage your money will enable you to start investing in property and begin building your foundation for financial success. And by establishing good money habits for yourself, then adhering to them, will pay dividends for you throughout the rest of your life. Go to Free Budget Planner Good investment property advice is when investing in property is its not dissimilar to having a successful business, it generally takes good management. Good managers generally have knowledge and skills. Many successful business people have the philosophy of hiring people smarter than themselves, so there's no reason that you can't use the same philosophy by getting your own 'credible' investment property advice. Keep an eye out on this web site as our 'no cost' professional investment property advice section will be available soon. How Much Money is Needed? Alternatively if you don't have existing equity to use as security many lenders will lend up to 95% of a properties value, so you would need 5% of the properties value and the purchase costs in order to get started when buying an investment property. More information: Value Investing In Property
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