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5 essential investment property strategies

June 13, 2022 by Patrick Casey

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

My 5 essential investment property tips

1. Equity

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

For this strategy to work, it’s important to understand how equity works and where you stand.

It’s also important that you don’t over-extend yourself. It’s very risky to max out your equity – especially 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 tenants and tax savings pay (mostly) for your investment property.

To maximise your potential tax deductions (and savings), get a professional quantity surveyor to give you a depreciation schedule. It’s definitely not a job for your accountant.

3. Negative gearing and positive cash flow

Negative gearing means you pay money towards the property each year – as the cost of the property exceeds the income of the property.

Positive cash flow, on the other hand, means 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 is a mistake many property investors make.

It’s also very important to understand how negative gearing works. It’s the most popular way to start investing in property, but you have to be able to ‘top up’ funds towards the property each month.

In time, each property will move into positive cash flow and you won’t have to keep adding funds.

4. Investment property research

It’s important to get the basics of property investing right. The good news is that if you do your research it’s hard to go wrong. Always buy in sought-after locations, close to public transport, with easy access to good schools and amenities. This will help you find good tenants.

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

5. A house or an apartment?

This question alone could fill a whole article, and it’s one without a straightforward answer. Both have the potential to work well for you, but it’s important to buy whatever suits your budget, cash flow, and the type of property that’s popular in each area.

A single-fronted terrace in inner city Melbourne may be great for capital growth, but it could end up costing you $300 a week (after tax). This is the kind of thing that can get people into financial trouble – and it’s out of reach for the average investor.

Only buy what you can afford. This will help keep you safe, and hopefully ensure that you can buy more properties in the future.

Ready to purchase your home? Talk to us on 1300 79 80 38 today.

If you would like assistance getting your accounts under control as we approach the end of financial year, call us today on 1300 79 80 38.

Visit our Financial Knowledge Centre where you will access educational videos and articles, plus join our monthly e-Newsletter to help improve your financial knowledge.

If this article interested you and you would like to speak to Pat Casey on the phone, select a time to speak Pat – Financial Planner Sydney.

At Assure Wealth we specialise in helping busy, successful families structure their finances to achieve greater wealth and financial peace of mind.

Author: Pat Casey – Managing Director & Financial Planner Sydney – Assure Wealth

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Disclaimer: The information provided on this website has been provided as general advice only. We have not considered your financial circumstances, needs or objectives and you should seek the assistance of your Walker Lane Pty Ltd Adviser before you make any decision regarding any products mentioned in this communication. Whilst all care has been taken in the preparation of this material, no warranty is given in respect of the information provided and accordingly neither Walker Lane nor its related entities, employees or agents shall be liable on any ground whatsoever with respect to decisions or actions taken as a result of you acting upon such information.

Assure Wealth Pty Ltd ABN 31 965 466 780 Corporate Authorised Representative no. 1244817, Patrick Casey Sub-Authorised Representative no. 1244748 of Walker Lane Pty Ltd ABN 70 626 199 826, an AFSL holder No 509305.

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Assure Wealth Pty Ltd ABN 31 965 466 780 Corporate Authorised Representative no. 1244817, Patrick Casey Sub-Authorised Representative no. 1244748 of Walker Lane Pty Ltd ABN 70 626 199 826, an AFSL holder No 509305.

The information provided on this website has been provided as general advice only. We have not considered your financial circumstances, needs or objectives and you should seek the assistance of your Walker Lane Pty Ltd Adviser before you make any decision regarding any products mentioned in this communication. Whilst all care has been taken in the preparation of this material, no warranty is given in respect of the information provided and accordingly neither Walker Lane Pty Ltd nor its related entities, employees or agents shall be liable on any ground whatsoever with respect to decisions or actions taken as a result of you acting upon such information.