Knowledge is Important
Entering the world of investment property is certainly exciting, but it’s important to get your head around the nitty?-gritty. There’s a lot of jargon thrown around, so it’s worth taking the time to understand it.
From vacancy rates to capital gains, there are various factors at play. They can influence the success of your property investment, so it’s essential to know what to expect and look out for.
Steer Clear of Empty
It’s essential to understand vacancy rates so you can make a sound investment decision.
When you choose where to buy a property, there are a lot of things to think about. One of the arguably most important factors is an area’s vacancy rate.
The higher the vacancy rate, the more properties in the area that are sitting empty without tenants. Of course, there are always going to be some properties that are vacant between tenants, but this should be for as short a time as possible.
An area with a 2 per cent vacancy rate may well be a better place to buy in than a suburb with a 5 per cent vacancy rate. In the first instance, two out of every 100 properties are vacant, but the figure jumps to five in 100 in the latter example.
You should aim for as low a vacancy rate as possible, notes the Australian Securities and Investments Commission. Vacancy rates aren’t just important when it comes to finding tenants. If you buy in an area with a high vacancy rate, you could find it difficult to sell your property in future years. Homebuyers in Hollywood Florida
Get the Money. Honey
In order to invest, you’ll likely need to borrow money from a bank or non-bank lender.
There are various options available to you, from coming up with a deposit to using the equity in your existing properties to enter the investment market.
If you’re borrowing money to invest, this is dubbed gearing. This can be positive or negative, depending on how much income the rental property generates against your ongoing costs.
Your lender can explain the finance options available to you when you’re choosing to invest.
The Ups and Downs or Capital Gains
You have to pay capital gains tax (CGT) in Australia, so it’s important to understand this concept if you invest in real estate.
If you choose to sell the property, you’ll have to pay tax on the difference between the cost to purchase the asset and the amount you sold it for, notes the Australian Taxation Office.
You can offset any capital losses against capital gains during the same income year, too. Subject to specific exemptions, CGT is not payable on your family home, but it is on rental properties.