As the end of the financial year rapidly approaches we might expect to see the usual promotions for investment products that offer tax deductions. Despite this increasing range of options, ‘bricks and mortar’ continues to be one of the most widely accepted and sought after forms of investment.
Residential property offers long-term investment returns with the security of direct ownership. It excels in the three key requirements for successful investing, namely: consistent long term growth in property values; reliable rental income and significant taxation deductions.
Another key attraction to investing in residential property is that most people are familiar with the home buying process and with local property values, which is different to many other forms of investment that usually rely on expert advice and information.
However, it is still recommended that property investors obtain as much information as possible before deciding on a purchase, particularly competent financial advice.
If your financial advice is positive and you have approval from your bank or lender to explore the market with the aim of making a purchase, then the following tips might help guide you in the decision making process:
• Choose affordable properties that are located in areas where there is a quantifiable demand by tenants. Usually, these are properties close to social and business infrastructure, such as shopping and transport nodes or simply being close to a town or the city. There can be some exceptions to this based around WA’s varied mining-based economy, so get good advice.
• Keep up-to-date with the main influences on property values in the market and choose one you think might benefit from this trend in the future. For example, property values can rise strongly in areas sought after by developers looking for suitable areas for home units and group dwellings. Or there may be a demand for older properties in areas where families want to build a new home. Perhaps a proposed freeway or train line extension might add value?
• Be aware of taxation laws and any recent changes associated with investing. You should discuss this with your financial adviser.
• Do lots of homework about property investment. Research on trends is available from organizations like REIWA, the Valuer General’s Office and a number of monthly investor magazines full of experienced commentary.
• Develop a network of contacts in the property sector ranging from local real estate agents, valuers, financiers and tradesmen. You may also consider using a Buyers Agent to help you find and secure a property.
• Finally, develop a long term property investment strategy and stick to it. For most investors the key objective is long term financial security. This means having a business-like approach to choosing a property and making a sound judgment when selling one.