You are thinking seriously about property investment – yet you think that you may not have enough money to start. Here are some pointers which could help to get you started.
List all of your assets, income and expenses to understand how much cash you have available to invest. As long as you have stable employment and a good employment track record, you should be able to get a loan.
You will need to be aware of all potential costs associated with the purchase – stamp duties, legal fees, building inspection costs and bank and mortgage fees. Work out your ongoing expenses such as utilities and council rates, repairs and maintenance, rental agency fees, and property insurance.
Remember to factor in the tax incentives that exist – if you rent out the home, you can cover your costs through a combination of the rental income and the tax incentives that favour investment. Expenses such as repairs and depreciation can be tax deductions, thus closing the gap between your costs and your rental income.
If your potential rental income will be less than the costs associated with the property, remember that you can offset this loss against your income such as salary and wages, business or investment income. Also consider that a new or near-new building is depreciable over 40 years at a rate of 2.5% per annum. Fittings and fixtures can be depreciated over 5 years. You will need to get professional advice in order to maximise your tax advantages and also provide guidance on aspects such as depreciation.
If you need to, you can consider getting a friend or family member to guarantee a percentage of the loan – these days some banks will allow a percentage guarantee – for example, if you need assets to cover 20% of the value of the property, and you only have coverage for say 10%, you could get a guarantor to cover the remaining 10%.
Another possibility is to approach the owner of a property in which you have an interest, and see whether he or she would be prepared to allow you to pay off the purchase price. If you are interested in doing this, get professional advice in structuring the sale and contract.
Finally, you could consider partnering with someone who has the money, in an agreement where you do the work, your partner supplies the finance, and you share the ownership.
Always be sure to consult with your real estate agent for help, advise and to find your next property!
YNM Real Estate
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