What to consider when investing in property

property keysThere are more people wanting to break into the property market than ever.  While this can be a daunting task, it doesn’t have to be if you seek the right advice from professionals who have extensive experience within the property game.  There are so many options out there, everyone seems to have an opinion and many of their suggestions are conflicting.  To start you on the right path you need to consider the following points;

Determine the type of property-

When a decision to invest in real property is made the first question an investor needs to ask is whether to acquire residential, commercial or industrial property. Small and first time investors have always preferred residential property largely because it is what they know. Commercial and industrial property has its advantages; however it is different to residential property. Commercial and industrial properties have different issues to residential property.

Some of the differences between commercial and residential property include:

  • Commercial leases normally have an initial lease term of 3 to 5 years,
  • Residential leases normally have an initial lease term of 6 months,
  • Commercial property normally have a yield that is around 6 to 8%
  • Residential property normally has a yield around 4 to 6%
  • Commercial properties are normally more expensive than residential properties

Determine the structure to hold the property

The decision of what type of structure to use is just as important as the purchase of the property itself.

The key questions that an investor should ask themselves include:

  • Will the property be negatively geared and who should receive this benefit?
  • Will this property be held long term?
  • What are the land tax costs of holding the property?
  • Will the property be transferred to another entity (i.e. SMSF) at a later stage and at what cost?
  • Who or what entity should receive income and capital gains in the future?

Selecting an appropriate structure that provides both tax efficiency and flexibility is often overlooked by many investors and advisors.

Key investment issues when acquiring a residential property investment

The following are some of the key factors to consider when selecting a residential investment property.

  • Is the area in strong demand and experiencing population growth?
  • Do the immediate surrounds offer great employment prospects for both tenants and future owners?
  • Does the area offer adequate infrastructure such as transport, shops and entertainment?
  • Is the area affordable to ensure constant demand?
  • Will the building type and design ensure that there is long term demand from both tenants and owner occupiers?

Don’t delay, talk to our professional team today and secure your financial future. For your FREE 1 hour property investment consultation please contact Lynda on (03) 9744 7144 or email lynda@mcmahonosborne.com.au

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