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 
experts 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, Domain, Property.com.au, Homehound, Buy My Place or the Real Estate Institute of Australia. 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. 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 calculator below to give you an idea of what you’re up for.
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Realestate.com.au Home Loans – stamp duty calculator
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.
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MoneyManager – 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.
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Archicentre 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 the Archicentre website. It also has lots of helpful fact sheets about buying property that you can download.
Independent 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.
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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.
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BMT & Assoc – 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 moment you take possession. 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 via the Law Institute or Law Society in your State or Territory.
Law Society of New South Wales
Law Society of Northern Territory
Law Society of South Australia
Law Society of Western Australia
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.
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Chartered Accountants – online search
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 FIDO – 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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4 Comments
Does anyone know if it is better to buy an empty investment property or one with a lease already in place?
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.
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.
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Information on the Moneygirl website is not financial product advice and you should consider obtaining independent financial product advice before making any financial decision. Alternatively, you can visit www.fido.gov.au for general advice about investing. Read more
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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.