Here’s Opteon’s Head of Depreciation and Quantity Surveying, Nadia Ditrocchio, with some tips for aspiring investors looking to take the next step in the property market.
1. Have a massive deposit
This is the tough one – “How can I save $100,000? You’re crazy!”
Back to the smashed avocado argument made famous by Tim Gurner.
The kicker is – if your home loan deposit is under 20% you’ll be paying Lenders Mortgage Insurance (LMI). The amount you pay is influenced by a number of things and it’s best to speak to your lender directly to see where you sit and how much this will cost. LMI is ordinarily applied directly to your home loan.
Without some sacrifice, creative saving ideas or other assisted ways of scrambling cash together this will be another fee to swallow. Quite obviously also, the more you put in now, the less you’ll pay overall. Interest and its effect over the life of the loan can never be overlooked.
2. Do your homework
This will likely be one of the biggest purchases of your life. It is well worth spending the time researching the suburbs you’re looking to buy in. Don’t only look only at property listings in your price bracket to know an area. Speak to a range of local agents in general terms, use online property reports or calculators, or have a pre-purchase valuation organised. Don’t be blinded by the pretty kitchen, think about why someone else would want to live there or buy the property from you. Location is always key.
3. Look at insurance products
Landlords insurance, income protection insurance, title insurance, the list goes on! Homework time again but investing in these products can provide some real comfort. Title insurance, for example, can be relatively cheap and is not widely publicised.
4. Don’t listen to your friends, listen to professionals
Property is a complex and diverse topic. Getting advice over a beer on a Saturday night may seem tempting but it’s probably not in your best interests. Certainly, use your peers for professional recommendations. There are a lot of wonderful building and pest inspectors, real estate agents, buyers’ advocates, Valuer’s and conveyancers doing great work out there. Use your friends to get their contact details, then listen to the professionals’ specific advice for you and your unique situation.
5. Renovation Contingency
If you’ve found the ultimate property but it needs a little work make sure you include a good contingency percentage in your budget. Things can (nay will) go wrong and you need to be prepared. We think between 5 – 15% is a good amount and depends on the scope of your proposed work and their risks. If you don’t end up eating into the contingency allowance and have money left over at the end of the project, fantastic! Use it to treat yourself to the smashed avocado you so longed for in your deposit saving days.
6. Get other advice early
Get a capital gains tax valuation and tax depreciation schedule early. As time goes on the valuation will become more expensive due to the complexity of retrospective research. Investors can utilise a depreciation schedule to maximise their tax return on a property investment (if their property qualifies). You can gain the cash flow benefits from tax deductions in year 1 if you have the tax depreciation schedule prepared. Find out more about Opteon’s Tax Depreciation services here.