Property Investment Success Stories and Tips on Maximising Your Profits
There's a lot of information out there on property. Most of it is noise that detracts from the fundamentals of real estate.
What we're considering today is some basic tenants of successful investing, that should guide you and give you certainty in your next real estate investment.
The essence of smart investing is to hitch your nest egg to an asset that appreciates over time. An asset with a low risk, that is tax effective and costs little to maintain. An asset that gets paid for by the tenant, and the tax savings it delivers in your situation. That's what we offer at CPPA.
Let's Get Certainty into your Real Estate Vision
What? - What kind of asset?
Residential- because we'll always need homes to live in. If the population is growing, investing in a home makes sense. We steer away from commercial for 2 reasons: 1. the trend for telecommuting and working from home will see commercial property decline in value with increasing vacancy rates. 2. It's a much higher interest rate to fund commercial property, and the gearing is much lower- at say 65%-70% maximum borrowings.
Residential House and Land Packages- because in that way, it is cheaper. It's true that a house land package will often get you a cheaper total price because the stamp duty is saved on the building. Plus tenants want and expect high standard of finishes these days. A new house delivers a premium product to the rental market and achieves a higher yield on your investment property, than an old tired 15 year old home.
Even if the gross rental yield was a similar rate, two factors allow new property to deliver higher net returns than older property. The first is depreciation allowances which can mean $6,000 to $12,000 a year difference. And the second is the high maintenance costs with older homes, which can easily run to the same kind of figures.
Where?- Where should I buy?
Sure there are Hot Suburbs, overheated mining towns and the like. But picking a location like that is either a "feast or famine" situation. Look at what happened to Gladstone. Six years ago it took off, then the bubble burst, and prices have returned to where they were. It's wise to pick areas that have multiple industries driving them, not just mining.
CPPA's has researched selected growth areas with great prospects for growth. Buying locally is one option, but buying in a growth area makes a lot more sense. Plus diversifying your investments in different states reduces your exposure to state land tax.
Hell you can even claim travel to your investment home once a year to inspect it!
Why?- Why invest in property?
When you look at the Australia's property market over the last 120 years, property has doubled on average every 10.5 years. That means it appreciates at 6.85% pa. But the best part is, when you factor in the gearing or leverage you achieve with a property investment, (with a 20% deposit) that 6.85% becomes 27%pa (after costs).
How?- How do we select the right investment?
CPPA have experience finding properties all over Australia. There are great value options including waterfront house land packages from $400,000. And all investments are sold on bank valuation.
Who? Who will help us get the investment strategy correct?
Let CPPA give you a no obligation assessment of tax savings that may apply in your situation. They'll arrange finance if required and ensure borrowings are in the correct structures for the best possible leverage and future portfolio additions.
In fact CPPA manage the whole investment for you, a turn key project management service- included at no additional cost.
Learn more- Call Rod Humphrey 0412 440 267
When designing & building an investment property you have a choice of finishes and design inclusions that will dictate the popularity of your home with tenants and property managers. It may be these differences that set you apart in the marketplace, ensuring longer tenant retention and higher return on your investment with a higher rental value.
1. Curb Appeal.
How do you get a great look from the curb for a new home... with not much in the way of a garden? Simple... it's the composition of elements. Letterbox/entry statement, one significant planting and an attractive path to the front door. Ideal compositions include curves, contrast, alternative textures and colours. Curb appeal can add thousands to the market value of your investment property.
2. Entrance Appeal.
The front door quality, it's size and the entrance size dictate first impressions, after curb appeal. Get this right and you and your tenants are more excited and delighted with the home. Nice entrance features include wall recesses for art or sculpture, feature lighting and a change of wall texture or colour. A good entrance design allows for a choice of flow through the house. Ideally direct to living, but not without 3 steps or more, and also a choice of a bedroom or study direction.
3. Open Plan Living.
Who doesn't want a living/dining/kitchen connection? One big open space ensures good family communication, and a sense of enlarged luxury space. Open plan living and kitchens often dictate the perceived value of a home, so spend some time to get it right.
4. Superior Kitchen.
Everyone loves stone benchtops or caesar stone/composite equivalents. An extra $3,000 makes a huge difference to a kitchen's impact and appeal in the marketplace.
5. Connection to outdoors.
Ensure the living areas open directly to the yard and a semi enclosed indoor/outdoor living area. Every Australian home should have this. It's what our climate demands and our lifestyles crave. Of course allow for the BBQ area, and casual dining.
6. Ducted Air.
Go the extra mile with a ducted system, instead of room by room split system airconditioners. this gives a luxury appeal to tenants. Plus the efficiencies of a whole house system are now better from a power consumption point of view, than several small systems.
7. Security screens, flyscreens, and window dressings.
Of course these all add to the finished look of the place, but it means additional comfort & security for tenants, and they really do appreciate that.
One of the most critical factors when it comes to investing in real estate is to know the financial performance of your investment.
Let's face it, we only ever go into an investment for the money it will make us.
There's one huge difference that new property delivers over and above older property. It's Depreciation. There's so much more depreciation allowed on a new home, than there is on any existing older home.
Think of it this way... inside the new home is a bag of money- $50,000 or thereabouts (based on a $500,000 home investment). That $50,000 is yours- the bottom line difference to your returns over the first 10 years of your investment. (Sure this number varies based on construction, finishes & window dressings etc).
Yet you won't find that depreciation in an older home. You'd be lucky to get a quarter of that is some situations. This is because the vast majority of depreciation occurs in the first 5 years.
To make depreciation work for you, you need a professional to prepare a depreciation schedule for the particular home. This sets out the depreciation allowable for each year of ownership. As a convert to depreciation schedules... I regret wasting so many years without them. It literally saves me $20,000 a year in tax across my portfolio.
Stamp Duty Differences- Another $4,000 or so
Stamp duty is also a big consideration when you buy a property. When you buy an existing property, you pay stamp duty on the total purchase price. With a house and land package, you only pay stamp duty on the land component.
Modern Designed Home
Experience tells us that people want open plan modern homes, not poorly planned older homes. With a house and land package, you also get a new, up-to-date house with all the latest features. This means that your property will be more attractive in the marketplace for any future resale.
Fewer Maintenance Issues
With an existing property, you almost inevitably run into problems – renovation, maintenance, equipment breaking down, perhaps even termites. You virtually remove these concerns with a new house and land package. For example, a new house and land package covers you for a 6-month maintenance period, appliance warranties and a 6-year builder’s warranty.
If you want information on investing in house and land packages talk to one of our client managers.