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What you need to do before investing in property

There are a plethora of reasons to invest in property, including the tax benefits and retirement planning. But let’s be honest, the main motivation is to be able to line your pockets with cash, purchase a sports car, own a property that smells of rich mahogany and be such a big deal that you need kidnapping insurance.

OK, perhaps not that far, but research from the Australian Bureau of Statistics (ABS) has shown that this dream is actually not implausible.

Over the year to June 2015, the combined capital city values of dwellings (both houses and units) increased by nearly 10 per cent. What’s more, residences in Sydney skyrocketed 18.9 per cent!
To put this into perspective, had you bought a $600,000 home in Sydney in June 2014, you would have made nearly
$115,000 in capital gains in just 12 months. Meanwhile, the ABS asserts that the average yearly income in Australia is around $75,000.
While these figures can make it seem like you need to get your foot in the door right away, the property market is not
without its pitfalls. Before making any financial commitments to properties, there’s one thing you should do first:
Get your finance sorted
The Australian Securities and Investments Commission states that visiting your mortgage broker to find the right loan is one of the first things you should do. The main benefit being you will be able to get an idea of your limit. Not only will this help ensure you don’t purchase more than you can afford, it can also help make your search much more efficient.
Property prices can differ significantly within suburbs, as a rather extreme example from CoreLogic RP Data shows. The lower quartile price for houses in Sydney’s Point Piper is in excess of $4.7 million, while at a hefty $30 million, the upper quartile is more than six times the size.
Knowing your exact limit will help remove all the properties from your search that are out of your price range. Bearing in mind that you shouldn’t blow your entire loan on a home’s price tag, as there are a number of ongoing costs associated with managing and maintaining an investment property.
According to the Australian Taxation Office, these can include:
 Advertising for tenants
 Council rates
 Repairs and maintenance
 Insurance
 Interest expenses
This isn’t to mention any unforeseen periods where your investment property is empty, leaving you without rental returns.
If you would like to know more about investing in property, we can offer expert advice, helping you to find the right loan for your unique situation.

Written by

Stephen Bonfield, the Managing Director, previously worked for one of Australia’s major home loan companies as an independent mortgage broker. Steve used this experience to set up his own mortgage broking company - a company that places customer needs at the forefront.

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