Property Management Made Easy: Your Trusted Resource to Efficiently Manage Your Real Estate Assets
Investing in property is often seen as one of the best ways to create wealth in Australia. However, if you are a first-time investor, knowing where to start and what to consider, so you make smart decisions, can be overwhelming. Outlined below is a deep dive into the process of property investing.
If you are a seasoned property investor, looking for insights into how to maximise your property investment and position it for success, read our Experienced Investor Guide, filled with proven insights from our most knowledgable property managers to help you drive greater results from your property investment.
Experienced Property Investor Guide
This is an investment property where income (usually derived from rent) is greater than the sum of all the expenses of the property. Effectively, you are receiving more rent each cycle than you are paying in expenses.
In this structure, each property pays for itself and can provide investors with additional equity and the opportunity to then purchase other investments.
A negative cash flow property, or what is often called a negatively geared property, is when your income is less than the sum of all your expenses – or in other words, the rent does not cover all of your costs.
This structure can offer a number of tax benefits in the form of tax deductions and is popular among investors that are making the most of capital gains. Your investment strategy will depend on your income and it is very important to talk to your accountant about the right structure for you.
You are most probably familiar with the term ‘property cycle’, but may not know exactly what it is, what factors influence the cycle and what it means when investing.
Property cycles are controlled by two competing forces. Supply (the number of properties for sale) and demand (the number of people looking / able to buy a property). If demand exceeds supply, property prices will increase, whether that be in terms of house sale or rent prices. If new supply comes into the market and exceeds demand, then prices will fall.
But what causes different markets to fluctuate?
As our population grows, demand also increases for properties – both for rental and home owners. As people start to buy and rent properties, the value of property slowly increases – the simple forces of supply and demand.
At the same time, developers and builders start building new properties to put on the market, savvy investors and homeowners looking to capitalise on the price rise also list their property for sale. This leads to an oversupply of dwellings, which eventually results in slumping home values and rent reductions.
Understanding property cyclesWhilst a property investment, when chosen carefully, can provide solid financial returns, it can also be an expensive asset to acquire and maintain.
To ensure you are not hit with any nasty surprises, being prepared for the major upfront and ongoing costs is a smart decision. It is also worth talking to your accountant about which of these expenses can be claimed through tax. For example:
Your real estate agent is the best person to help guide you. They will consider the following elements before recommending the best method of sale:
Buying a well located property investment is a key ingredient to investment success. Here is a look at some of the key neighbourhood and property features you should look for and where to add value.
We have previously touched on the importance of understanding property cycles and how demand plays a key role. One of the key influences on demand for an investment property is its location.
Good locations will always be in demand for both renters and buyers, so spending time assessing and finding the best location can make a big difference in the long run.
Here are 10 neighbourhood features to look for:
Make sure you thoroughly research the area you are considering investing in. Ensure you are across the area's demographics, infrastructure plans, the capital grow rate of the area and more.
Look for a low maintenance property. Keeping your costs down is undoubtedly a priority, so finding a property with low maintenance costs is important.
Are there any planned upgrades in the neighbourhood? Is it on the brink of transformation by urban renewal, gentrification or improved infrastructure? These can be good signs of potential future growth of an area.
The local council is a good source of any future projects. Be careful that the future plans are not to support an area that has already boomed. Also beware of oversupply of apartments, as this can dilute demand and therefore the long-term value of the property.
Spending time doing your financial due diligence is important to ensure you are making the right decision. Assess the expected purchase price, rental income, interest rates and repayments to determine how much you could potentially make on the investment. Talking your accountant or financial advisor is recommended.
If the property you are looking at is on a strata title, you will own a portion of the property. Normally this would include the apartment and parking, combined with shared ownership for the remainder of the common areas.
As an owner of a strata property, you are required to pay strata fees or levies, which cover the maintenance costs of the shared or common areas in the building. It is important to understand the impact of this phase on your budget.
Review vacancy rates to find an area with strong demand. Low vacancy rates may imply that a rental property will not sit empty for long - which is important for investors.
Finding a property that appeals to the people who are actively renting in the area is a smart idea. If the majority of people renting in the area are families, then buying a one-bedroom apartment may mean it is not in hot demand.
A key benefit of owning a property investment is the ability to add value.
Here are our top 12 cost-effective suggestions:
Finding and retaining good tenants is a key ingredient for your investment success. With the right tenants, you are more likely to receive rent on time and have the property looked after. These benefits are vital for an investor.
Plus, when you consider how much revenue you will miss if an investment is sitting vacant for a week, a fortnight, a month – you will clearly understand the importance of finding and retaining good tenants.
Here are some features that are popular with tenants:
Not all landlords are focused on driving rental return and maximising their investment. There’s a whole sub-segment of landlords who are renting out their property due to work or family scenarios.
These landlords are often more interested in finding tenants that take care of their property, rather than being purely focused on maximising their rental return. While some investors are tempted to manage their own property, having a local, dedicated property manager to look after your home is often a smarter decision as:
All of these tasks are difficult to manage, if you are not local.
I want to talk about renting out my homeA key to a successful investment is having good tenants who pay their rent on time and look after the property.
Once a landlord encounters a problem tenant, owning and managing a rental property becomes difficult and time consuming. A property manager is your skilled partner who takes care of your property and your tenants.
An experienced property manager can help save landlords a significant amount of time and money and make owning a rental property more rewarding.
A property manager is responsible for:
With over 33,000 properties under management across our network, we have seen the true value a property manager offers an investor.
They help ensure:
And remember, property management fees are tax deductible.
8 qualities of a great property manager
As an investor, you want to ensure you are maximising your rental returns.There are three key ways to sell a house or property in Australia:
You should be asking your property manager these questions each year when they conduct a rental appraisal:
Your property manager undoubtedly oversees a number of similar properties in your area and is, therefore, a local specialist.
Having an annual rental appraisal is an important step to ensuring you are maximising your rental yields.
What do I get from an appraisal?Are you a seasoned property investor and looking to drive the greatest returns from your investment in order to achieve your longer term financial goals?
Then this guide is for you. Written in consultation with our most experienced property managers, we share proven insights into how to maximise your returns and drive greater results from your property investment.
Experienced Property Investor Guide
Are you looking to maximise the potential of property investment? Get a free rental appraisal with a local McGrath Property Manager.
How much rent should I charge?A key goal for all investors is undoubtedly to maximise returns, but you may be unsure how to achieve this. This guide has been created to help both new and experienced investors ensure they have the right knowledge to set themselves up for success.
Get our property investing guide