Buying is just a small part of residential property investment

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According to Cameron McEvoy, Property Investor and Blogger, there are three stages for property investors: research and due diligence, then the offer and purchase process, and last of all the ongoing management and capital maximisation of the investment property. What Cameron finds interesting, is how different people place varying hours of their time into these stages, and how this can be a cause for concern for the less informed among us. So let’s look at each of these stages and get a feel for what is involved in them:

1)      Research and due diligence. This is where you must first identify your objectives.

  • What are my long-term life goals? How much money do I need to retire on?
  • What kind of investment risk profile do I have?
  • Is property investment for me? Do I have the time, dedication, and longevity of commitment to stick to it?

And then hone in to get to the “little” questions, about the specifics of what you’re looking for in an investment property, such as:

  • Apartment, townhouse, or house? Off the plan, or pre-existing?
  • Do I want to live near my investment to keep an eye on it? Or am I OK for it to be interstate or international?
  • Do I want a “set-and-forget” approach, or something more hands on and high demand (but with greater potential for capital gain)?

2)      Making an offer and purchasing. This is where would-be buyers go through the offer process, negotiate the deal, have their investment property “team” (Mortgage broker, lender, solicitor/conveyancer, accountant, financial planner, tax depreciator, strata officer, and most importantly, mentor) on hand, ready to hit the “green-means-go!” button once the offer is accepted.

3)      Ongoing property management and capital maximisation There are many things that will keep you busy when it comes to this area, with each one of these requiring a chapter to cover them better.

  • Finding a reputable managing agent
  • Tenants moving out and sourcing quality new ones
  • Attendance of strata meetings, building maintenance, and occasional council disputes
  • Improvements, renovations, maintenance, repairs
  • Tax depreciation and annual tax and income management

Getting the most out of your investment property is vital. This is because the return you see from your property can vary hugely, due to a list of unforseen changes to your life. For example, your personal income changes. Few working Australians actually earn the precise same amount of income each year. This needs to be taken into consideration in your overall tax assessment. And what if you don’t work or study for a year? Lose your job? Or get a big $50,000 salary increase? This alone will change the dynamic of your investments’ potential to net you solid returns.

Cameron McEvoy is a property investor and maintains a blog, Property Spectator.

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