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Buying an Investment Property

Ok, so you’ve decided that you’d like to buy an investment property. What next? For starters, you’ll need to do some research – read a book or two by one of the property Little investment propertiesexperts mentioned in Property 101. There’s a lot to think about (way too much to include here!) so it’s really important that you do your own research first.

If you want to get straight into searching for property try Realestate.com.au, DomainHomehound, or Buy My Place. The great thing about the Internet is that you can easily search for property in regional areas or even in other States or Territories without having to leave home. However it’s always a good idea to talk to other people who’ve invested in those areas and preferably to the locals too. Talk to local Property Managers (at the Real Estate Agents) – they should be able to let you know what local conditions are like (e.g. is there much demand for rental property in the area? etc.). Research as widely as you can.

If you feel that you need it, professional help is available through Margaret Lomas’ Destiny Financial Solutions and Monique Wakelin and Richard Wakelin’s Wakelin Property Advisory (if you’re in Melbourne). Have a read of their books first (see Property 101) so you’ll get a feel for their philosophies – they’re quite different.

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So, what are some of the things you’ll need to think about and where can you get up-to-date information?

Stamp Duty

Australian State and Territory Governments impose stamp duty (a type of tax) on transfers of property – how much you’ll pay depends on the cost of the property and the rates set by that particular State or Territory Government. Unfortunately it can be pretty hefty – try the calculators at MoneySmart to give you an idea of what you’re up for.

Moneygirl Recommends

MoneySmart – stamp duty calculators

(Scroll down to get to the calculators).

Mortgages

There seem to be about a million different options on the market, all with their own benefits. Whatever you choose, make sure that you shop around. Try the following comparison websites for starters.

Moneygirl recommends

RateCity – compare home loans

Building and pest inspection

Before you buy any property, you should seriously think about getting a building and pest inspection done. If you do, you’ll receive a written report that rates the current condition of the property, any problms and the likely cost of dealing with those problems.

Moneygirl recommends

Australian Institute of Architects

The Australian Institute of Architects has a team of architects who can inspect the property you’re thinking about buying – you’ll find all the details and sample reports on their website. It also has lots of helpful fact sheets about buying property that you can download.

Building blocksIndependent valuation

Before you buy, you should also think about having an independent valuation carried out. That way, you’ll get an unbiased opinion as to what the property is really worth so you can feel confident you’re not paying too much.

Moneygirl recommends

Herron Todd White

Herron Todd White is an independent property advisory group that can provide you with a valuation after inspecting the property and analysing the local market.

Depreciation report

Once you’ve purchased your investment property have a depreciation report done. Many of the fittings and fixtures (and in some cases, even the building) can be depreciated over a number of years and this means more money in your pocket thanks to Australian taxation laws.

Moneygirl recommends

BMT Tax Depreciation (Quantity Surveyors)

BMT will prepare a depreciation schedule for you – hand it over to your trusty accountant at tax time.

Insurance

Make sure that you have your property insured (and take out both house and contents and landlord’s insurance) from the day you officially buy the property. See Insurance for details.

Find a solicitor

You’ll need to use the services of a solicitor when you’re buying an investment property – they’ll carry out the appropriate title searches, etc. Search for a qualified solicitor by Googling the Law Institute or Law Society in your State or Territory.

Find an accountant

An accountant will be able to help you maximise allowable deductions related to the purchase of an investment property on your tax return.

Moneygirl recommends

Chartered Accountants Australia & New Zealand

Use the online search tool to find yourself a Chartered Accountant (CA).

Other ways of investing in property…

There are a couple of other ways of investing in property – either investing in listed companies on the Australian Stock Exchange that are involved in property (such as Westfield) or investing in property trusts. If you’re interested in either of these options have a look at the sections on Shares or Managed Funds. You can even invest in international property through some managed funds.

Find a financial adviser

Check out the Australian Securities and Investments Commission’s website MoneySmart – it has loads of great information about obtaining personal financial advice and finding a qualified financial adviser. Experts often suggest you find an adviser who charges by the hour instead of receiving a commission.

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>> Next in Property – Nuts and Bolts

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6 Comments

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Pip
8 Sep 2009 at 11:03 pm

I recently went to one of Margaret Lomas (Destiny Finance) property seminars. Quite interesting and would recommend if anyone’s interested in learning a bit more about investment properties.

tres cher
15 Oct 2009 at 9:43 pm

Does anyone know if it is better to buy an empty investment property or one with a lease already in place?

MaryH
19 Oct 2009 at 10:46 am

It probably depends – if you buy an investment property with a lease in place you’ve got the security of knowing that you’ll be getting rent coming in from the moment you take possession. On the other hand, you might not be able to raise the rent for a while (that is, if you wanted to), depending on the conditions of the lease. It’s probably a good idea to read the lease before you buy the property.

Elle
8 Dec 2009 at 10:29 am

I’m a member of Destiny Financial Solutions (the property specialist/finance group headed up by Margaret Lomas) and they really are fantastic if you’re looking for help getting into property investment. Margaret has lots of books out too – my favourite is ‘How to create an income for life’ (published by Wrightbooks). It takes you through all the ins and outs of buying investment property.

Property smarts - Moneygirl
12 Apr 2011 at 9:44 am

[…] you downsize? Could you save more by waiting another year to buy? Or would you consider buying an investment property somewhere, rather than a place to live in […]

Tanya
14 May 2012 at 3:26 pm

I have used BMT Quantity Surveyors 3 times and find them to be very efficient, professional and the reports are of a high standard. I think purchasing an investment property with a tenant in place gives you financial security. I tend not to change anything about the property for the first 12 months. (besides general maintenance).

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