Posted on December 3, 2021
How much time should I spend looking for an investment property?
There are three main benefits savvy investors seek from an investment property:
• High Yield
• Maximum tax benefits
• Capital growth
The reason for this is that a savvy investor will want to minimize any risk involved in the investment. If an investment doesn’t offer these three benefits then this means that the investment will become speculative because you’re either trying to make money through capital gains, or through extremely high yields – mining towns are an example.
The type of investment strategy that you employ will determine the risk factor and will also determine the amount of time you spend looking for an investment,
Some investors look for capital gains through buying old, renovating and flipping property. You can spend a lot of time scouring the pre-loved websites for properties in well-established growth suburbs before finding something suitable. This method is very time consuming, costly and risky.
When you consider the time spent on searching for the property, time, effort and expense in renovating, cost of stamp duties and selling and then the tax paid on whatever profit is made, if a profit is made, then this is a lot of effort made in the attempt to make a gain.
There are organizations out there that sell courses on how to do this, and they charge a lot of money. Unless you’re a professional builder or project manager and are doing this as a legitimate full time business, then you’re wasting your time as most people fail at this.
An alternative strategy is buying into an existing property in a well-established area. Th property may be easy to find and you will need to be well funded. Holding on to the property for any length of time may be costly as these types of property are highly negatively geared. This is due to rentals being out of proportion to the purchase price, e.g. 2.5% Yield and limited claims on depreciation.
If the property doesn’t perform over a number of years, the monthly costs of maintaining the loans and any maintenance may put you into a deficit. This can become a time-wasting scenario if there isn’t any significant growth in the area to cover all your expenses. Also, that money spent on maintaining the property could have been spent on other investments.
There is one investment strategy that has rarely failed and that is a buy and hold strategy in new suburban growth corridors. When we say hold we mean at least a minimum of 10 years and if possible, never sell.
Build costs for house and land packages are fairly standardized across Australia. The major factor that an investor needs to take into consideration is the cost of land. This will determine how much a house and land package will cost.
Buying off-the-plan will also save you in stamp duty. In fact, most new properties in Australia are bought off-the-plan.
Consider a first home buyer looking for their first home in a new estate. That first home buyer might have seen a builder’s advertisement on realestate.com depicting a low-priced package. This may have excited the buyer to come in. Builders use this tactic of advertising low prices to lure clients in the door.
They go into a showroom, speak to a sales consultant, run through all the extra inclusions they require to give them that personal touch to their home. Next step is to secure a block of land in the estate. By the time they walk out, the home costs them $100,000 more than the advertised price.
In every case, even with investors, the builder can only commence construction on the home once the land registers.
Do you think an investor should do the same?
An investor can run door to door speaking with sales consultants until blue in the face and not be any further informed or sure whether they are doing the right thing at the right price. Why? They are talking to the wrong people. Sales consultants in estate showrooms are not investment advisors, they deal with owner occupiers.
You’ll be wasting your time talking to them. So, coming back to our original question: How much time do I spend looking for an Investment Property?
The answer: Very little time at all.
How come? There are expert property investment advisors who know how to maximise on:
• High Yield
• Maximum tax benefits
• Capital growth
They work closely with quality builders that specialize in building specific full turnkey packages designed for the investor in mind. This is a totally differently calculated investor home specially designed after years of market experience in fulfilling tenants’ requirements in a rental home.
Even though there may be a wealth of information on the internet and you have a DIY mentality, you leave yourself open to all sorts of mistakes.
The whole process can be very simple if you let the expert take the guess work out of the equation.
Minimise the risk by ticking all the investment boxes from:
• making sure you don’t over spend,
• explaining the right cash flow structure for your investment,
• making sure you maximise on tax returns
• doing the due diligence on the growth corridors
• secure the right block of land close to amenities and infrastructure
• ensure a quality builder
• ensure a seamless process
If you need any help in looking for an investment property, drop us a line. I suggest you download our FREE Report.