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Investing in Property

Buying an investment property has long been considered to be one of the most secure and effective ways to build wealth.  However, it is fundamental to understand that it must be undertaken as a long term strategy to be successful.

Typically, investing in property begins with buying your own home first and then purchasing a second property from there.  However, this does not necessarily need to be the case if you are living at home and earning good income.  At Baggetta & Co we have several clients who have chosen to invest in property at a younger age than normal, and with the help and support of their parents, focus on wealth creation.

WHY PROPERTY?

Well considered, sensible rental property investments are attractive for many reasons:

THE STEP BY STEP PROCESS TO SUCCESSFULLY INVEST IN PROPERTY

Andrew Carnegie, Business Magnate and one of the wealthiest men during the 1800’s, said that “90% of all millionaires become so through owning real estate”.  If we consider the wealthiest families today, owning real estate continues to be a large part of their asset portfolios.

However, successfully investing in property will not come naturally to many of us.  Therefore, to make well considered property investment decisions and grow wealth through property, it is important to take a structured step by step approach and get help when you need it.

STEP 1 – SEEK PROFESSIONAL QUALIFIED ADVICE ABOUT YOUR CURRENT FINANCIAL POSITION

The most important step, before you start looking for and investing in property, is to consult with an Accountant to answer some fundamental questions about investing in property and your particular circumstances.

An accountant, with experience in property investing, will:

Many property investors miss this step, believing it to be unimportant.  However this step will ensure that you think more strategically about your investments and increase your rate of success in achieving your desired outcomes.  Investing in property and failing can be very costly in money and valuable time to grow wealth.

STEP 2 – OBTAIN FINANCE PRE-APPROVAL

Before you start searching for an investment property, know how much you can borrow so you can set a budget and ensure that there will be no surprises with Full Approval.

Don’t miss out on a good investment just because you did not research how much you could borrow before you started looking for a rental property.

Also research which loan is right for you.  There are many different loans to suit different situations.  Your Accountant can help you with this.

STEP 3 – SEARCH FOR AN INVESTMENT PROPERTY

Having worked through the financial considerations, you are now ready to buy the property bearing in mind that you are not actually going to live in it, and making sure that you take a rational approach to the criteria you would have identified with your Accountant.

Invariably, the criteria you would most consider would include:

Take the time to find a Real Estate Agent who specialises in working with Investors as they are more aware of what makes a good rental property.  Also share your selection criteria and financial situation with your Agent to help locate properties that will appeal to you.

STEP 4 – THE BUYING PROCESS

Once your Offer to purchase has been accepted by the Vendor, the next phase of the buying process kicks in – exchange, settlement and completion. This is where you close the deal. It is the process wherein the house is signed, sealed and delivered and usually takes an average of 30 to 90 days.

At a glance it involves the following:

This step is very important to ensure that you do not get stuck with a property that has major problems.  Unfortunately, if you are buying in a ‘hot market’ the vendor may refuse to perform this step diligently and walk from the deal, giving it to someone else.  Be sure to carefully weigh any decisions you may make to shortcut this step and keep your goals in mind at all times.

STEP 5 – MANAGING YOUR INVESTMENT PROPERTY

You can do it yourself and save the management fee, but it is recommended that you do not.

Managing your own rental property can be time consuming and difficult to remain emotionally detached when you have tenants complaining to you, or you personally have to deal with damage to your property.

Using the services of a professional property manager can be more cost effective as they are up to date with what is happening in the market and what tenants are prepared to pay, they will have prospective tenants on their books and the experience to vet the tenant, and because they manage many properties they will have access to reputable trades people at normally cheaper service fees.

Property managers fees are tax deductible, and they also keep accurate and comprehensive information about your property which ensures your accountant has the right information each financial year to maximise your tax deductions.

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For more information about the services we provide, or to find out if you are eligible for a free no-obligation consultation, call us now on 9317 7300.

The information provided on this website, including the material and contents provided in the website publications, are informative in nature only and you should not act specifically on the basis of this information alone. It should not be used as a substitute for legal, business, accounting, tax, financial planning or other professional advice. If expert assistance is required, professional advice should be obtained.

Paul Baggetta is the Founder & Principal of Baggetta & Co. Paul Baggetta has been a Taxation Accountant since 1981, a Financial Planner since 1998, and in 1993 qualified as a Real Estate Licensee, holding a Triennial Certificate (currently not trading) and operated his own Real Estate business for property investment clients for over 5 years as a second business.

Financial planning services are provided by Paul Baggetta as an Authorised Representative (No. 261469) of Capstone Financial Planning Pty Ltd. ABN 24 093 733 969. Australian Financial Services License No. 223135.

 

Taxation & Accounting services are provided by Paul Baggetta as a Registered Tax Agent (No.61487008) and is a Member of SMSF Association, FIPA & NTAA.