Considering buying an investment property?
Your Property Investment Cheat Sheet: Key Tips to Avoid Common Mistakes
Investing in property can be incredibly rewarding, but having a clear plan can make all the difference. Here’s a cheat sheet to help you avoid common pitfalls and make confident choices.
1 Define Your Goal
Are you investing for rental income or long-term growth? It’s tough to get both in equal measure, so decide what’s most important to you.
If you’re after rental yield: Go for a low-maintenance “lock-up-and-leave” property, like an apartment in a well-kept building, that won’t need much upkeep.
If you’re focused on growth: Consider a property with potential for minor renovations. Adding value through updates can help you build equity for future investments.
2. Create a Property Brief
Before you start searching, make a list of your top priorities. This will keep you focused and help you avoid emotional decisions. Ask yourself:
- What type of property do I want? (Apartment, house, etc.)
- How much renovation am I willing to take on?
- What’s my budget, preferred areas, and desired property size?
- How close do I want to be to transport and amenities?
- Do I have a recent sale in mind that meets my criteria?
List your top 5 “must-haves” before diving in. Having these priorities clear from the beginning makes it easier to stay on track.
3. Prepare a Cash Flow Plan
Get a solid understanding of your finances before making any commitments. A simple cash flow spreadsheet can help you keep track of:
- Expected rental income
- Ongoing costs (maintenance, management fees, etc.)
- Target yield
- Renovation budget (if applicable)
- Weekly cash flow
Be conservative with your estimates. If you base everything on high expectations, you might end up disappointed. Budgeting with realistic figures will give you a much clearer picture of your potential returns.
4. Make the Most of Tax Benefits
A good accountant can help you take full advantage of tax benefits available to property investors. Here are some key deductions to keep in mind:
- Negative gearing
- Depreciation on the property
- Mortgage interest
- Property management and maintenance costs
These tax benefits can really add up, especially over time. Checking in with a mortgage broker to clarify your financial position is also a smart move.
By keeping these tips in mind, you’ll be well-prepared to make a smart investment decision. And if you want guidance along the way, we’re here to help you navigate each step and set you up for success.
