Four Things for First Time Property Investors to Know

While it can be daunting and a little scary to start out in property investment, it can also be exciting and hopeful; for many people, property investment is a route to financial security. However, the fact remains that channelling funds into a property in which you do not live can occasionally seem nonsensical.

Experience and history proves that when a person is prepared to invest in property in the long term, rewards can be enjoyed – rewards that usually compensate for the risk.

Having said this, successful property investment doesn’t just happen. There are many pitfalls and problems that first time property investors can run into and end up shelling out a lot of money to cover. First time investors need to think about tax, tenancy issues, property management, interest rates, insurance, repairs, repayments and even renovations. Too much!

Here we look at four things that property investors can benefit from knowing and things that will help them to avoid unnecessary hardship and stress:

#1:  ‘Property education’ seminars and conferences need to be treated with caution. While they can be marketed as opportunities to learn about the market and strategies for managing your money and beginning a property portfolio, the actual purpose of these seminars is very often to sell property with inflated prices to enthusiastic and eager first time buyers.

While there is nothing wrong with education, it is a good idea for intending investors to seek education from a range of trusted, credible and experienced sources and to avoid committing to a purchase before a comprehensive understanding is acquired.

#2:  Research is vitally important! It is a little scary to realise that so many people devote incredible amounts of research to the purchase of technological gadgetry but little to no research into a property for purchase.

When you set out to conduct research you will find that there is an impressive amount that is available and many sources to consult. Information about trends in property prices, suburbs that are increasing and decreasing in value and popularity, pieces of good advice and effective strategies can be found from some (but not all) online sources and other media.

#3:  Making a purchase just because you hope to increase your tax refund is rarely wise. Those with one investment property or more, quite often receive an income because they have made a financial loss (negative gearing).

Ultimately, you want your investment property to be positively geared as it will then be making you a profit. Opting to purchase property only to avoid paying so much tax is rarely a good reason to financially commit yourself so extensively for so many years.

#4:  Gaining an understanding of depreciation is useful as it is one of the most attractive tax benefits offered through ownership of an investment property. At tax time, a deduction can be claimed for the depreciation of the building cost of the property and also the items within the property (that are owned by you).

It is useful for first time property investors to have a good understanding of depreciation because, while money is not directly paid for these costs, money is received through your tax return. A knowledgeable, skilled and experienced accountant will be able to assist a client with information about depreciation and claiming depreciation costs for an investment property.

In order to enjoy success and profitability as a property investor, first time property buyers benefit from having access to credible and accurate information. It is imperative that they do not enter into any purchase blindly but understand how to maximise and capitalise on their investment.

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