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15

January

2015

5 Rules for the Investor

Welcome back to the new year. We all hope your Xmas and New Year break was a restive and re-energizing one. So what does the property market hold for the coming year? It seems the experts are still divided, however there is now more talk of an interest rate cut amongst the professionals. This willl no doubt inflence both sales as well as the rental market outlook.Below is a link from RP Data over the last quarter of 2014 which outlines the rental market in all capital cities including Brisbane. RP DATA RENTAL DATA

From a property investors view point, there are only 2 major things to consider. Do I sell or do I buy?

If you're an optimist, you would always say it's a good time to buy the right property. Pessimist, well never since the market looks a bit dodgy and probably always will.

I wise old man once told me that you should never sell property. I suppose for some people, this is very true. What if you owned a property 20 years ago and sold it back then. Sometimes people kick themselves years after the fact and say "if only I had that property now". Whatever your reasons for selling, we all hope your investment experience was a good one financially.

If you're not on the road to selling, there are always ways to make your investment work harder for you as well as any new ones on the horizon. Below are 5 simple steps or rules that most investors follow.

1. Shop Around for the Right Loan or refinance NOW!

We recently wrote an article about sourcing out an honest and reliable mortgage broker. The interest cost of your loan along with any borrowing fees are the biggest expense an investor will have. Being able to compare loans and talk to an expert in this area is nearly essential. We recently wrote an article about sourcing out an honest and reliable mortgage broker. The interest cost of your loan along with any borrowing fees are the biggest expense an investor will have. Being able to compare loans and talk to an expert in this area is nearly essential. 

Is it also time to look at your current loan and get a better deal? 0.25% on a loan of $400,000 will save you around $1000/year or $20/week. Below is the link to the previous article published in mid-december last year.

An essential tool to build your portfolio

2. Carefully Select Your Property Manager

This really speaks for itself. A property manager who neglects your property, is a yes man or women for you, who will recommend the tenant from hell to get the extra $20/week or who uses tradespeople and then gets a kick back from them can seriously make the property investment experience a regrettable one.On the other hand, what about the property manager who owns the company, who takes a personal interest in your investment, who will go the extra mile for you and will recommend only tenants after due diligence is done.
 

You can draw your own conclusions from the above, needless to say that a good property manager is worth their weight for peace of mind as well as maximum yield.  

3. Maximize Your Depreciation Allowance

A quantity surveyor is another essential tool for the property investor. Most investors understand the concept of depreciation but not everyone gets the maximum benefit, meaning they are not minimising their tax liability.

There are many rules for both newer and older houses, and only a good and reputable quantity surveyor will be able to make sure you achieve the maximum deductions for your property.

It’s important to remember that depreciation (and other property expenses) can only be claimed for the period during which the property was rented or available for rent, so this needs careful attention. In addition, the tax treatment of repairs and maintenance and capital improvement is quite different – repairs and maintenance is an immediate deduction while capital improvement is a possible depreciable item. Your accountant or financial adviser should be able to help you maximise your allowable deductions and, in conjunction with a quantity surveyor, they should be able to identify all depreciable items.

4. Keep Up-To-Date With Maintenance

Our property managers deal with the day to day problems of maintenance on numerous rental properties. Remember, there are multiple reasons why maintenance should not be neglected. 

Fixing small problems to prevent larger ones, the quality of tenants that your property attract as well as the possible legal ramifications if their is an accident or incident.

Maintenance should be budgeted for, and of course is tax deductible in your yearly returns. 

It’s also a good idea to take adequate property and landlord insurance to help protect you against major repair bills and damage caused by tenants in the unlikely circumstances that their situation changes.

5. Adequate Tax Planning

Before buying your investment property it would be wise to seek independent tax advice to ensure the transaction is structured in the most tax efficient way. This means ensuring the purchase is made through the appropriate entity – through a trust, company or as a personal transaction, and in consideration of protecting the current Capital Gains Tax concession.

The ATO website provides a list of items that are claimable against your property of which your accountant should be familiar. It would also be prudent to make yourself familiar with the current list as receipts etc may have to be kept. In addition, it may influence you on whether certain expenditure is required or not and the most effective way to outlay the necessary funds. Remember you can preclaim your deductions before the next financial year if you so desire to help meet the running cost of your property.

The ATO website provides a list of items that are claimable against your property of which your accountant should be familiar. It would also be prudent to make yourself familiar with the current list as receipts etc may have to be kept. In addition, it may influence you on whether certain expenditure is required or not and the most effective way to outlay the necessary funds. Remember you can preclaim your deductions before the next financial year if you so desire to help meet the running cost of your property.
 

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