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Buying your first investment property can be a bold step to a more prosperous and secure future. But it can also pose risks. The Successful Investor’s Michael Sloan outlines five strategies to help you take the right path.

Give me the main points

  • Most investors use equity from their home for their deposit – but leave yourself wriggle room.
  • Hire a quantity surveyor to work out a depreciation schedule for your property.
  • Understand the difference between positive cash flow and negative gearing.
  • Do your research. Then do some more.
  • House or apartment? No right or wrong answer here – just more homework!

Buying your first investment property can be exhilarating (if a little stressful). When done well, property investing can create long-term wealth for you and your family.

Here are five strategies to consider when you’re starting out. Tactics to help you avoid the mistakes so many novice investors make. Read on!

My 5 Essential Investment Property Tips

1. Equity

Most people use equity from their home to help buy their first investment property. They then use the equity from both their home and investment property to buy their next property. This makes owning a portfolio of properties easier over time.

For this strategy to work, it’s important to understand how equity works and get an idea where you stand. It’s also important not to over-extend yourself. It’s risky—and ill-advised—to max out your equity if it leaves you in a financially vulnerable position (i.e. with no ‘buffer’ in an emergency).

2. Depreciation

Generous tax breaks—including depreciation—ensure your investment property is mostly paid for by the tenant and tax savings. To maximise your potential tax deductions—and savings—engage a professional quantity surveyor to give you a depreciation schedule. It’s not a job for your accountant.

3. Negative gearing and positive cash flow

Negative gearing means you pay money towards the property each year since the cost of the property exceeds the income of the property. Positive cash flow, on the other hand, sees you make money from the property each year (i.e. total expenditure—taking into account all costs—is less than total income, including tax breaks). Not knowing how much a property will cost you each week before you buy is a mistake many property investors make.

Make sure you understand how negative gearing works. It’s the most popular way to start investing in property, but you must be able to ‘top up’ funds each month towards the property. In time, each property will become positive cash flow and you won’t have to contribute additional funds.

4. Investment property research

It’s important to get the basics of property investing right. Happily, if you do your research it’s hard to go too far wrong. Always buy in sought-after locations, close to public transport with easy access to decent schools and amenities. This means you should find good tenants without difficulty.

Also don’t make the mistake of only looking in the suburb where you live (or imagine you might want to live). You can buy anywhere in Australia, so don’t restrict yourself to the house around the corner.

It’s also wise to diversify your portfolio. Once you buy in one location, it can be tempting to buy again in the same place. However, that approach concentrates your risk—it’s best to diversify.

5. A house or an apartment?

This is a whole topic all by itself—and one without a straightforward answer. Both can perform well for you. It’s important to buy what suits your budget and cash flow, and the type of property that’s popular in its area.

A single-fronted terrace in inner-city Melbourne may be great for capital growth, but it can cost you $300 a week after tax. Cash flow demands like this get people into financial trouble, and it’s out of reach for the average Aussie investor. Only buy what you can afford. This will not only help keep you safe, but may mean you can buy more properties in the future.

This article originally published here.

The State Government has again pledged its commitment to the exciting and visionary Ocean Reef Marina project, agreeing to sign a new joint Memorandum of Understanding with the City of Joondalup.

Joondalup Mayor Troy Pickard was told of the news on Friday (20 May) during a visit to the marina site with local members Ocean Reef MLA Albert Jacob and Joondalup MLA Jan Norberger.

The MOU announcement coincided with news that the State Government has also allocated $500,000 to the project as part of its 2016-17 Budget.

The MOU is a formal agreement that acknowledges a strategic alliance and the shared commitment of the City and the State Government as joint landowners of the site in bringing the Ocean Reef Marina project to fruition.

Joondalup Mayor Troy Pickard said the MOU was a vital step in a long process as the City could not deliver a project of this size and complexity on its own.

“This document will set out the roles of the City and the State Government and how we will work together to resolve ongoing issues, recognising that a collaborative approach is needed to develop the marina,” he said.

The Mayor said the extra funding would enable the City to continue the planning phase of this complex and multi-faceted project.

The City is currently progressing the environmental and planning approvals for the Ocean Reef Marina via an amendment to the Metropolitan Region Scheme (MRS) boundary and a Public Environmental Review of the marine based components.

Mayor Pickard said the State Government’s financial contribution would enable the City to complete the outstanding tasks required for these processes, as well as finalise the Ocean Reef Marina Structure Plan.

“It will also allow the City to undertake any additional environmental work as required by the relevant agencies, respond to submissions arising from the public advertising of the PER, MRS Amendment and Structure Plan, and continue our extensive liaison with key stakeholders,” he said.

“The City has been custodian of the Ocean Reef Marina and championed this project for a considerable amount of time and committed significant resources.

“The environmental and planning approvals process currently underway is complex and challenging, with some 35 different environmental and planning studies or investigations being undertaken in recent times.

“This considerable body of work represents a financial investment of approximately $2.6 million, and whilst there is still some way to go, the funding from the State Government is timely.

“It is anticipated that the MRS Amendment, the PER and the Structure Plan will be advertised for public comment in the latter half of 2016, subject to agreement by the relevant State Government approval agencies.”

In October 2015 the City requested the State Government to take over as proponent of the project, mindful that it does not have the capacity and resources to build the Ocean Reef Marina on its own and would need the State Government or a public/private partnership to develop the facility.

“The City is preparing a structure plan in collaboration with the Department of Planning in its pursuit to obtain the necessary planning approvals that would ensure the desired urban outcomes of the Ocean Reef Marina concept plan,” Mayor Pickard said.

“Moving forward the City aims to work with the State Government to determine how the project is best progressed to construction stage.

“As land owners, the City would still like to be actively involved in the decision making process and work collaboratively with all stakeholders to produce an approved, financially viable, and publicly supported project that is delivered in accordance with community expectations.

“I can assure all of our residents and ratepayers that the City remains extremely determined to see the Ocean Reef Marina come to fruition.”

The Ocean Reef Marina project includes approximately 750 boat pens/stackers, boat ramps and boat trailer parking, hotel/short stay accommodation, residential apartments and single lots, food and beverage outlets, retail and service commercial, public open space and community amenities, an Internal beach, sea sports club and sea rescue facilities.

FAST FACTS

2016 – City receives funding from State Government in 2016-17 Budget to continue approval processes. State Government agrees to sign another Memorandum of Understanding with the City.

2015 – City calls on State Government to become the proponent of Ocean Reef Marina project.

2014 – Initiation of the Metropolitan Region Scheme boundary amendment by the Western Australian Planning Commission.

Environmental Protection Authority determined to assess the marine based components (under section 38 of the Environmental Protection Act 1986) via a Public Environmental Review.

2013 – Submission to the Western Australian Planning Commission of a request to amend the Metropolitan Region Scheme boundary.

2012- Signing of the Ocean Reef Marina Memorandum of Understanding with the State Government.

2011 – An amended concept plan was endorsed by Council as the basis for the preparation of the Local Structure Plan for the development.

2009 – Concept plan seven endorsed by Council for community consultation. Received 95.6% support from the almost 12,000 respondents who made submissions.

2007- Ocean Reef Marina Committee, Government Steering Committee and Community Reference Group established.

One of the most exciting sporting events ever seen in Perth is returning and we have your tickets! International Ice Hockey Australian Tour are bringing their heart stopping, adrenaline pumping action to our Perth Arena this June and Element Finance have two GOLD STANDARD tickets worth almost $350 to giveaway.
For your chance to get close to the Ice, enter our competition in 2 simple steps:
1. LIKE the Element Finance Facebook page
2. Visit the Element Finance page and comment on this image with the name of the friend you would like to have cheering next to you at the match on 18 June.
But hurry, competition closes on 24 May. Winner announced 26 May. Don’t forget to get your mate to enter you in the competition too! For full T&Cs, please email mike@elementfinance.com.au

We here at Element Finance are super excited to introduce to you the most recent Mortgage Broking expert to join our team, Leandro de Jesus.

If ever there was someone that made discussing finance and home loans truly an enjoyable experience, that someone is Leandro. His genuine enthusiasm to help each and every one of his clients succeed with their property goals is clear in every instance.

Himself an active property investor, Leandro understands what it can take when it comes to starting or growing your investment portfolio. His first hand experience in the WA property market continues to prove invaluable for his clients. 

Focus: Leandro is the guy you want on your side for all things property investment. Living in the City of Joondalup, he has an intimate knowledge of the surrounding suburbs. If its discussing home loan structure, negotiating a personalised deal with your lender or connecting you with other property professionals, he has you covered.

Saving up your deposit is the first step in buying a home and when your bank account balance starts to look good it’s easy to get excited. But it pays to be realistic. Exactly how much money is enough? In this article we take a look at some of the upfront costs involved with buying a home to help you set a proper savings goal before you make your move.

The deposit you contribute towards your mortgage is only part of the funds you need to purchase a property. Many first-time buyers assume that 10% of the purchase price will be enough to cover everything, but unfortunately that isn’t necessarily the case. There are many costs involved in purchasing a property, let’s take a look at other things you need to think about as part of your purchase.

1. Deposit on your mortgage

It used to be possible to borrow nearly 100% of the purchase price of the property, and use your savings to cover the other expenses, but these days that’s usually no longer the case. Most lenders require you to have at least 5% of the purchase price to put towards your mortgage. Depending on the home you want to purchase, the lender may even require you to put 10 – 20% of the purchase price towards your mortgage. Have a chat to us about different lender’s criteria to ensure you know what you can afford.

2. Stamp duty

Stamp duty is a cost that varies from state to state and it is calculated against the price of the property you wish to buy. We can help you calculate approximately what your stamp duty costs will be on the price range of home you’re looking at, so talk to us when you’re planning your budget.

3. Lenders mortgage insurance

Unless you have a deposit of 20% or more to contribute towards your mortgage, the lender who is providing your loan will require you to pay lender’s mortgage insurance (LMI). Unfortunately, the cost of this will also vary. LMI is calculated according to how much deposit you have, how much you intend to borrow and how much the home costs to purchase.

4. Borrowing costs

There are a range of different fees that apply to getting a mortgage. These differ from lender to lender and loan to loan, but generally speaking, you will need to allow for things such as application fees, lender valuation fees and a settlement fee. Some lenders also charge for legal supervision at settlement and document processing. Again, ask us what these costs could be with your chosen lender, and we’ll help you to fit them into your budget.

5. Pest and building inspections

Getting a building and pest inspection usually costs around $400, but this will vary depending on the size of the property. It really is worth the expense because it could cost you a lot of money to fix any problems the property may have after you purchase it. By getting a building and pest inspection before you buy, you’ll know exactly what you’re up against and have the opportunity to choose a different property if it looks like you can’t afford the repairs.

6. Conveyancing

You will need to employ a solicitor or conveyancer to legally transfer ownership of the property you are buying. They will also perform all the property and title searches necessary and take care of the documentation. Conveyancers can also explain sales contracts, take a look at your section 32, auction terms and any other legal elements of purchasing a property so that you fully understand what you’re getting into.

7. Insurance

Your lender may require you to take out building insurance on any property you wish to purchase. This is not only an upfront cost, it is ongoing and you’ll need to maintain this cost annually. You have the freedom to shop around amongst the various insurance carriers to get yourself a good price. Once you move in, it is also a good idea to get contents insurance as well. Usually the two can be bundled together so you can save on purchasing them individually.

8. Moving-in costs

Many people get so excited about getting their first home they forget to calculate their moving in costs and include them in their budget. Remember that you may need to hire the services of a removalist to move in your stuff, and that can be expensive! There’s also likely to be items of furniture you’ll need to buy and most people want curtains and blinds at the windows.

You’ll also need to pay to have your utilities connected. These may include telephone, internet, gas and electricity.

9. Contingency funds

Last but not least, it’s important that you have some funds put aside for any unexpected expenses. Of course, it’s difficult for us to predict what these may be, but you never know when you might encounter a problem. Perhaps you’ll have a blocked drain that requires a plumber, or light sockets that don’t work and require an electrician. It’s all part of the fun of owning a home!

Although this may sound daunting, remember, we’re here to help you budget to purchase your property and help to make sure there are no hidden surprises. If you’re getting ready to purchase a home, please don’t hesitate to give us a call for a chat. We’ll help you determine whether you’ve saved enough money to cover your deposit and all your expenses. We can also help you get pre-approval for your home loan so you can get started on searching for your dream home! Please call us today.


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