How you Can Make the Most Out of Your Investment Property
Investing in real estate is a big job to take on, and you never quite know which way the market is going to swing at any given point. However, there are certain ways you can go about making the most of your investment and survive the ups and downs of the property market.
While it goes without saying that you’ll make most of your money off of the rent your tenants pay, there’s plenty you can do to take full advantage of the benefits of being a landlord. Here are some of the best ways you can maximise your returns and get the most out of your investment.
Renovations
As many first-time property investors get their start by purchasing cheap houses for sale, one of the most popular ways to improve investment properties is to renovate and upgrade them.
A well-renovated property will mean you can charge higher rent and it’ll be more attractive to tenants as they’re scrolling through real estate listings. Furthermore, it will save you money on repairs and maintenance as the property will be fitted with modern technologies and high-quality additions.
Renovations also come with significant tax advantages for investors. Australian law allows you to claim depreciation on the useful life of Plant and Equipment (such as appliances and carpet) and up to 40 years worth of deductions on any construction costs you pay at 2.5% per annum.
When you renovate, you’ll also be able to claim instant deductions on any items you throw away. Make sure you hold onto them and get them valued by a surveyor so that any amount that hasn’t already been written off will become a 100% tax deduction.
Finding the right tenant
If your newly renovated property attracts higher-paying, happier tenants, you’re more likely to experience smooth sailing and receive fewer complaints and maintenance requests. The longer your tenant stays in your property, the less often you have to worry about the expensive and time-consuming task of relisting and finding new renters.
If you’re happy with the tenants you have, don’t get too big for your boots and try to drastically raise the rent. Even a small increase in weekly rent can drive your tenants out, and you leave you stuck with an empty investment property.
Working with a property agent
Managing your investment property may take more work than you realise. Working with a property manager will allow you to leave all the hard work to the professionals and give your tenants the service they deserve.
Your property manager will be there to support your tenants and be their main point of contact, and satisfied tenants mean a more consistent income for you. Most managers will only require a 5% to 10% cut of your rental income, which is a small price to pay for the convenience and professionalism they can offer both you and your tenants.
Explore other tax benefits
In addition to the tax benefits associated with renovations, there are plenty of other areas you can claim deductions on. This can include:
- Accounting and bookkeeping services
- Council rates and land tax
- Advertising costs
- Property management services
- Landlord and building insurance
- Loan interest charges
In addition to this, if your property is negatively geared (the interests and other costs that you pay are more than the income that it generates), you can use this to reduce the amount that you’re taxed on your salary. For example, say you earn $100,000 a year from your job and $30,000 a year from rental income, but it costs $50,000 to maintain your investment property. This means you have a rental property loss of $20,000 per financial year, and therefore you’ll only need to pay tax on $80,000 of your wages.
When done the right way, real estate can be an exciting and highly fruitful investment opportunity. Whether you’re interested in purchasing a small apartment or a development property, it’s important that you always seek expert advice and don’t take on all the responsibilities by yourself.