4 Things You Need to Know When Buying Sydney Investment Properties

For many people, ownership of an investment property is an indicator of financial security and particularly for the future, astute investors commonly put their money into property. Investment property Sydney is particularly popular for property investment and quality properties are highly sought after and for good reason – considerable financial gains and benefits are to be made if property investors are well prepared, do their property research and seek credible advice.

As you set about purchasing an investment property, there are a number of things to know and be clear about.

1:  From the outset, you need to be clear and sure about your property investment strategy. Some investors invest in property with the intention of generating high short term rental returns, while other investors intend to hold on to the property for a long time in order to see good long term capital growth. Regardless of the strategy you pursue, it is important to be clear about the path you will take and your reasons and intentions for doing so.

2:  Unfortunately, many first time property investors neglect to seek professional property investment advice. Choosing the appropriate investment property in accordance with your financial situation, your needs and aspirations involves a delicate balance and careful consideration. A credible and experienced advisor is best placed to provide guidance and give you a critical analysis of your situation now and in the future. Be mindful that the advisor with whom you work should be neutral and have no particular allegiances to any particular company or organisation that may be involved with a property you favour.

3:  Buying an investment property in Sydney can be very exciting and it is useful to be aware of the potential benefits that can result from your acquisition. Some of the most significant benefits are:

  • The generation of capital growth – the increase in the property’s value over time
  • Income provided through property rental – when you rent out an investment property, a source of income will be provided by the rent paid by tenants, although there will be a number of expenses that you are required to pay
  • Taxation advantages that come from the negative gearing of your investment property – ultimately your tax bill is reduced when your property is negatively geared as the costs of owning your investment property can be deducted from your total income.

4:  While the advantages of owning an investment property are exciting and attractive, it is necessary to keep in mind that the way an investment property is chosen should be quite different to how you would choose your own home.  This means that you should:

  • Select a property that matches with your property investment strategy (for example, whether you want to negatively gear the property)
  • Have a complete understanding of all of the expenses associated with an investment property, including: stamp duty and legal fees, council and water rates, strata fees and real estate and property management fees.
  • Plan ahead so that an appropriate length and terms of lease is negotiated with tenants. You should also ensure that you are able to cover repayments in the event that your property is untenanted for a particular length of time.
  • Select the most suitable and manageable loan for your situation. Many property investors opt for an interest only loan as this reduces the repayments they are required to make and generates more cash flow.

Buying one or more investment properties is something to which many people aspire, but in order to make wise and lucrative property investment decisions, careful research is needed, together with clarity about your property investment strategy, goals and personal financial situation.

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