Buying an investment property

We’ve all got a friend or family member who says that they have “made a fortune” from investing in residential real estate.

The theory goes that you buy a house,fill it with tenants and sit back as the rent rolls in. The tenants pay the mortgage or pay for your new lifestyle as a retired landlord.

If something sounds too good to be true, it probably is.

We aren’t property investment experts, but there are few things that we think you should think about before you take the plunge into residential property investment:

  • Can you afford to pay the rent if you don’t have a tenant?
  • Do you understand the tax consequences of being a property investor – this is an area that is constantly changing, so if you don’t know what a “bright line test” is, we suggest that you need to get some advice.
  • Have you factored in all of the costs – the costs of buying (legal fees, building reports, etc), the costs of owning (rates, insurance, maintenance, body corporate fees, property management fees etc) and the costs of selling (legal fees, real estate agent commission, tax etc)?
  • Do you need the hassle of owning an extra property?

What we recommend is that you surround yourself with experts before you take the plunge – get an accountant who can help crunch the numbers and advise on the tax, a mortgage broker who can help you structure the lending, a property manager to advise on rentability, and (of course) a good lawyer.

Talk to a financial adviser about how residential property investment fits into your overall financial plan. Remember that buying a house is the easy part – selling a house may not be so easy if you change your mind.

If you need a hand identifying great advisers, give us a call and we’d be happy to help.