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Tips for First-Time Property Investors

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Investing in real estate can be a rewarding venture, providing a steady stream of income and the potential for long-term wealth accumulation. However, it’s essential to approach this journey with careful consideration and a well-informed strategy.

While property investment can yield significant returns, it’s crucial to acknowledge the inherent risks and market volatility that can impact your investment. Property prices can experience substantial swings with little warning, and while values may rise, they can also decline, potentially resulting in breakeven or even losses. 

Being prepared and knowledgeable is vital to navigating this dynamic landscape successfully. Read on for some crucial points from the expert OpenCorp team to help you make sound decisions when purchasing your first investment property. We always provide you with the tools to mitigate potential pitfalls and maximise your chances of success.

Prioritising financial goals and assessing costs

When purchasing your first investment property, one of the most critical aspects is setting a budget that aligns with your financial capabilities and long-term goals. As you embark on this journey, it’s important to consider the loan term, prioritise other financial objectives, and evaluate upfront and ongoing costs associated with property investment.

The loan term for your investment property will depend on the deposit size you have saved. Generally, longer loan terms, such as 25 or 30 years, may be available if you have a larger deposit. It’s essential to assess your financial situation and determine the loan term that suits your needs and repayment abilities. Remember that a longer loan term may result in lower monthly repayments but may also lead to higher overall interest payments.

As you consider taking on one of the most significant debts of your life, it’s crucial to prioritise your financial goals before jumping into any property investment. Evaluate your short-term and long-term objectives, such as retirement savings, paying off debts, or funding your children’s education. By establishing clear priorities, you can ensure that your investment aligns with your financial plan and does not hinder progress towards your other goals.

Research and deciding where and what to buy

Making informed decisions about where and what to buy for your investment property is crucial, as these choices can significantly impact your short-term and long-term profitability. Conducting thorough research will provide valuable insights into the market, potential price growth, renovation needs, rental returns, vacancy rates, and the presence of local amenities. 

Consider the following factors when exploring different suburbs and property options:

  • Property prices in the suburbs
  • Price growth potential
  • Proposed developments
  • Whether the properties you are considering require renovations 
  • The average rental returns and vacancy rates in the suburbs you are exploring (Higher rental returns indicate a potentially lucrative rental market, while low vacancy rates suggest strong demand from tenants)
  • The availability of local amenities 

Understanding all of this ensures your investment aligns with your financial goals and maximises your potential for long-term success.

Appointing a property manager

Do you have the time to manage the property on your own effectively? If you are time-poor or located a significant distance away, appointing a property manager can be wise. A property manager will take on the responsibility of handling various tasks, allowing you to focus on other priorities. 

Here are some key responsibilities that a property manager will manage on your behalf:

  • Marketing and advertising, creating compelling property listings, using multiple channels to reach potential tenants, and scheduling viewings to attract suitable applicants
  • Selecting reliable and responsible tenants with thorough background checks, including employment and income verification, rental history, and reference checks that document the condition of the property, including any existing damages or maintenance issues, to protect your interests as a landlord
  • Regular inspections of the property ensure it is maintained in good condition by the tenants
  • The collection of rent from tenants ensuring prompt and consistent payments
  • Coordinating any necessary maintenance and repairs for the property

It’s important to note that property management services come at a cost, typically ranging from approximately 7% to 10% of your total rental income each week. While this expense should be factored into your budget, the benefits of professional property management often outweigh the financial outlay.

Understanding potential tax deductions

Owning an investment property not only provides a potential income stream but also offers opportunities for various tax deductions. It’s important to be aware of these deductions as they can help offset the expenses associated with your property and reduce your overall taxable income. 

Here are some common tax deductions that you may be eligible to claim for your investment property:

  • Expenses incurred for advertising the property, such as online listings, signage, and print advertisements
  • Fees paid to property managers for their services in overseeing the property, including tenant screening, rent collection, and property maintenance
  • Various borrowing expenses associated with financing your investment such as loan interest charges, loan establishment fees, mortgage broker fees, and other related charges
  • Council rates, land tax, and strata fees
  • Building depreciation allows you to claim a deduction for the loss of value of the building structure over time
  • Repairs, maintenance, pest control, cleaning, and gardening 
  • Premiums paid for building and landlord insurance 
  • Expenses related to managing your investment property, such as phone costs, stationery, and accounting fees

It’s important to stay updated on the specific tax regulations and requirements in your country or region. Additionally, note that tax deduction rules may vary, and it’s advisable to consult a qualified tax professional or refer to the official guidelines from the relevant tax authority, such as the Australian Taxation Office (ATO) website.

Create a better, brighter future with property investing through OpenCorp

Let our team provide the information and guidance you need to make wise investment decisions through every step of the process. We’ll help you find and complete your first purchase with expert guidance and then guide you through your investment property journey to help you achieve your financial goals. Let’s chat!

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