So, you’ve decided to make the leap and invest in Adelaide property. Congratulations! You’re well on your way to financial freedom and growing your personal wealth. But the world of property investing can be an overwhelming and stressful place – especially for first-timers. So it’s important to follow the right advice.
So what exactly is the right advice with it comes to investing in Adelaide property? Read on to learn everything about investing for beginners – how to invest in Adelaide property.
Why should you invest in Adelaide property?
For the tax breaks and deductions
Owning an investment property allows you to take advantage of several tax breaks and deductions – all of which can save you money during tax time. Deduct the cost of owning, maintaining and managing your investment property to help lower your taxed income for years to come.
To increase your cash flow
One of the main reasons many people look into investing in Adelaide property is to create more cash flow. Cash flow is the money left over after the mortgage payments and operating expenses have been paid for your investment property. In short – profit.
The more money you pay off your investment property, the more cash flow you create for yourself. This builds up your equity and creates a passive income.
To diversify your portfolio
Portfolio diversification is the practice of spreading your investments across different assets to help lower any financial risk. This reduces your portfolio volatility and can give you a higher return overall.
How to invest in Adelaide property for beginners
Figure out your goals and start a plan
It’s easy to get excited and jump in with both feet first – but the best landlords take time to establish their goals and create a careful plan.
Before you begin searching for that perfect property, ask yourself these questions:
- How long do you want to know this property?
- What is your financial situation? How much can you comfortably borrow?
- What Adelaide suburb do you want to invest in, and why?
- What is your knowledge of the Adelaide rental market?
- What will your rental yield be?
The answers to these questions will help you formulate a plan and make smarter investing decisions.
Get your deposit together
You won’t get very far without a deposit. But how much do you need?
Ideally, you would have a deposit of 20% or more of the final property price. But saving that deposit could take years. Thankfully, many mortgage lenders are becoming more flexible. The amount of deposit required will vary from lender to lender, but many will accept a deposit as little as 10% or 5%. The only kicker is that you may have to pay Lenders Mortgage Insurance.
Another option is a guarantor loan. A guarantor is a trusted person with enough equity in their own property to provide a guarantee instead of a cash deposit.
But for those who already own a home – good news! You may be able to use the equity in your own home as a deposit. It’s time to chat to a mortgage broker to know your numbers. Our friends at Rise High Financial Solutions can help you understand your financial position.
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Calculate your up-front and ongoing costs
Figuring out how much you can spend upfront on that investment property is the easy part. But what about ongoing costs – such as maintenance, property management and fees?
Set aside a budget for pre-purchase pest and building tests and Strata reports. Some other ongoing costs for rental properties include:
- Body corporate/strata fees
- Council and water rates
- Property maintenance expenses
- Land tax (if applicable, depending on the value of your home)
- Costs relating to the professional management of your investment
- Tax agent or accountant fees
Find the right investment property
Now that you have your goals in place, a deposit, and a budget set up, the fun can begin – searching for your perfect investment property! So what should you look for?
Location, location, location!
When it comes to getting a good return on your investment, it’s all about the location. The location of your property will determine the rent you charge, the quality of your tenant and your vacancy rate.
Properties close to the city, business districts or universities make ideal investments as central locations are often in high demand. These are often units or apartments.
Properties further out from Adelaide are often more cost-effective and larger. So if you would rather invest in an Adelaide house, consider areas within an easy commute to the city.
Choose the low maintenance option
An older property will attract higher maintenance costs for the owner. So choose a property that’s low maintenance and easy to maintain, and this will attract more stable, long-term tenants.
Although it’s the tenant’s responsibility to maintain a garden, try and keep the garden as low input as possible. The tenants will find it easier to maintain which is win for both tenant and owner.
Buy with your head, not heart
Good investors make their decisions based on facts – not on what they fall in love with. So leave your emotions at the door when you go to that next open house. What you like in a home may not be what your tenants want.
Can’t separate your emotions from good decision making? We can help. Our Investor Support Team can advise you on what property attributes attract tenants and what property improvements you can do to achieve a higher yield. Contact us HERE to learn more.