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Understanding the Property Investment Process

Investing in property is often regarded as one of the most effective methods of wealth creation in Australia. However, for first-time investors, the prospect of where to begin and what factors to consider can feel daunting. Below, we delve into the intricacies of property investing to guide you through the whole manage a property process.

If you’re an experienced property investor seeking strategies to maximize your investment and position it for success, explore our Experienced Investor Guide. Packed with insights from our seasoned property managers, this guide offers proven tactics to help you achieve greater returns on your property investment.

Table of Contents

WHAT ARE THE STEPS TO INVESTING IN PROPERTY?

01

Understand How Much You Can Borrow

02

Organise Lending Pre-Approval

03

Document Your Goals

04

Research the Market

05

Talk to Your Accountant

06

Find a Conveyancer or Lawyer

07

Do a Pre-Liminary Cash Flow Analysis

08

Understand the Costs of Investing in Property

09

Find a Property & Do Due Diligence

10

Purchase a Property & Hire a Property Manager

SECTION 1

WHAT TO LOOK FOR IN YOUR LOCAL REAL ESTATE SCENE

Two Main Strategies for Structuring an Investment Property

OPTION 1 | POSITIVE CASH FLOW PROPERTY
Positive cash flow property refers to an investment where the income, typically generated from rent, exceeds all property expenses. Essentially, you're earning more rental income each cycle than what you're paying out in expenses.

In this scenario, each property sustains itself and may even generate additional equity, providing investors with opportunities to expand their investment portfolio.

OPTION 2 | NEGATIVE CASH FLOW PROPERTY
Negative cash flow property, often known as negatively geared property, occurs when your income falls short of covering all property expenses. In other words, the rental income does not cover the total costs.

This structure may offer various tax benefits through deductions and is favored by investors seeking capital gains. Your investment strategy should align with your income, and it's crucial to consult with your accountant to determine the most suitable structure for your financial situation.

SECTION 2

UNDERSTANDING THE PROPERTY CYCLE AND ITS IMPACT ON INVESTORS

What are Property Cycles?

UNDERSTANDING THE VALUE OF YOUR PROPERTY

You're likely familiar with the term "property cycle," but understanding its intricacies and how it affects your investments may be less clear.

Property cycles are influenced by two key factors: supply and demand. When demand outweighs supply, property prices tend to rise, whether for sale or rent. Conversely, when new supply surpasses demand, prices typically decline.

But what drives these fluctuations in different markets?

As our population expands, so does the demand for properties, both for renting and ownership. This increased demand naturally leads to rising property values, driven by the fundamental forces of supply and demand.

Simultaneously, developers and builders begin constructing new properties to meet this demand. Savvy investors and homeowners, aiming to capitalize on the market's upward trend, also list their properties for sale. This influx of supply eventually leads to an oversaturation of properties, causing home values to decline and rental prices to decrease.

SECTION 3

WHAT ARE THE COSTS OF PROPERTY INVESTING?

Exploring the Costs Associated with Property Investment

PROPERTY INVESTMENT COSTS

Whilst a property investment, when chosen carefully, can provide solid financial returns, it can also be an expensive asset to acquire and maintain.

To ensure you are not hit with any nasty surprises, being prepared for the major upfront and ongoing costs is a smart decision. It is also worth talking to your accountant about which of these expenses can be claimed through tax. For example:

  • Purchase costs
  • Loan establishment fees
  • Mortgage insurance
  • Purchase of whitegoods or appliances
  • Utility connections
  • Stamp duty
  • Conveyancing and legal fees
  • Interest on the loan
  • Building and landlord insurance
  • Strata fees
  • Land tax
  • Council rates
  • All property management fees
  • Property maintenance costs
  • Accountancy fees

SECTION 4

HOW CAN I FIND THE RIGHT PROPERTY INVESTMENT AND ADD VALUE?

7 Key Things to Consider When Looking for an Investment Property

Purchasing a strategically positioned property investment is a fundamental element for investment triumph. Below are essential neighborhood and property attributes to consider, along with opportunities for value addition.

TIP 1 | INVEST IN AN AREA YOU KNOW

Ensure thorough research of the area you plan to invest in. Familiarise yourself with its demographics, infrastructure plans, capital growth rate, and more.

TIP 2 | LOW MAINTENANCE AND SOUGHT AFTER PROPERTIES

Look for properties with low maintenance requirements. Keeping costs down is essential, so prioritize finding a property with minimal maintenance expenses.

TIP 3 | WHAT ARE THE FUTURE PLANS FOR THE AREA?

Research any planned upgrades or developments in the neighborhood. Is the area undergoing urban renewal, gentrification, or improved infrastructure? These factors can indicate potential future growth.

TIP 4 | DOES IT OFFER THE RIGHT RETURNS?

Conduct thorough financial due diligence to assess the investment's potential returns. Evaluate factors such as purchase price, rental income, interest rates, and repayments to determine profitability. Consulting with an accountant or financial advisor is advisable.

TIP 5 | STRATA TITLE? HAVE YOU ASSESSED THE PROS AND CONS?

If considering a property with strata title, understand the implications of shared ownership and associated fees. Strata properties require payment of strata fees or levies for maintenance of common areas. Assessing this impact on your budget is crucial.

TIP 6 | LOOK FOR AREAS WITH A LOW VACANCY RATE

Examine vacancy rates to identify areas with high demand. Low vacancy rates suggest rental properties will be occupied consistently, a significant factor for investors.

TIP 7 | WHAT DO TENANTS WANT?

Consider the preferences of potential tenants in the area. A property appealing to the local rental market increases its demand. Aligning property features with tenant preferences enhances rental potential.

SECTION 5

HOW CAN I ADD VALUE TO MY PROPERTY INVESTMENT?

Adding Value to My Investment Property

HOW TO INCREASE VALUE IN YOUR PROPERTY INVESTMENT

One of the significant advantages of owning a property investment is the potential to increase its value.

Here are our top 12 cost-effective suggestions:

  • Paint
  • Build a carport
  • New curtains and blinds
  • Install a skylight
  • Replace light fittings
  • Put in a BBQ
  • Steam clean carpets
  • Sand the floorboards
  • Replace door handles and knobs
  • Install a dishwasher
  • Install air-conditioning
  • Install built-in robes

SECTION 6

HOW TO REACH AND ATTRACT THE BEST TENANTS

Secrets to Attracting the Best Tenants to Your Investment Property

ATTRACTING & RETAINING GREAT TENANTS

Finding and retaining good tenants is a crucial factor for your investment success. Having the right tenants increases the likelihood of receiving rent on time and maintaining the property. These benefits are indispensable for investors.

Furthermore, considering the potential revenue loss if an investment remains vacant for extended periods—whether a week, fortnight, or month—underscores the importance of finding and retaining quality tenants.

Here are some features that appeal to tenants:

  • A good location
  • A high-quality kitchen
  • Air conditioning / heating
  • High-quality fixtures and appliances
  • Good quality blinds, shutters, or curtains
  • Reliable internet connection
  • Pet-friendly policies
  • A usable outdoor area
  • Ample storage options
  • Longer lease terms, such as 12 months

WHAT TO THINK ABOUT WHEN RENTING OUT YOUR HOUSE OR UNIT

Not all landlords prioritize maximizing rental returns and optimizing their investments. Some landlords rent out their properties due to personal or family circumstances.

These landlords often prioritize finding tenants who will take good care of their property rather than solely focusing on rental income. While some investors may consider managing their own properties, hiring a local, dedicated property manager is often a wiser choice because:

  • They have a better understanding of pricing.
  • They possess insights into the rental market, tenant preferences, and overall demand.
  • They conduct thorough screening of all potential renters.
  • They handle maintenance issues and other concerns.
  • They ensure timely rent payments.
  • They stay updated on local legislation changes.
  • They conduct regular property inspections to ensure proper upkeep.
  • They negotiate rent adjustments on your behalf.

Managing all these tasks can be challenging, especially if you're not local.

SECTION 7

WHAT IS THE ROLE OF A PROPERTY MANAGER?

Role of Property Manager Explained

PROPERTY MANAGER ROLE

Having reliable tenants who pay rent punctually and maintain the property is essential for a successful investment.

Dealing with problematic tenants can make owning and managing a rental property challenging and time-consuming. A property manager serves as your experienced ally, managing both your property and your tenants.

PROPERTY MANAGER RESPONSIBILITIES

An experienced property manager can save landlords significant time and money, making the ownership of rental properties more rewarding.

Responsibilities of a property manager include:

  • Dealing with day-to-day tenant demands
  • Advertising the property for rent
  • Hosting open homes
  • Finding and screening tenants
  • Managing ongoing reporting processes
  • Overseeing the lease sign-up process
  • Managing budgets and financial records
  • Conducting regular inspections to ensure property upkeep
  • Managing rent, including setting, adjusting, and collecting
  • Handling emergencies, complaints, evictions, and other issues
  • Understanding local landlord-tenant laws and tenant care

With a considerable number of properties under management in our network, we have witnessed the genuine benefits that a property manager provides to investors.

Benefits of using a property manager include:

  • Regaining your time as they handle day-to-day tenant requests
  • Reducing stress with professional property management
  • Ensuring compliance with legislative requirements and staying updated on changes
  • Accessing more comprehensive insurance coverage
  • Fostering tenant satisfaction and reducing turnover
  • Regular communication and property updates
  • Minimising problem tenants through rigorous screening and reference checks
  • Enhancing cash flow with consistent rent collection and penalty enforcement systems
  • Effective management of property expenses through proactive issue resolution
  • Efficient tax preparation with accurate budget management
  • Optimizing rental returns by adjusting pricing to local market trends

Additionally, property management fees are tax deductible.

SECTION 8

WHY SHOULD I HAVE A RENTAL APPRAISAL?

Rental Appraisals

RENTAL APPRAISALS

As an investor, it's crucial to maximize your rental returns.

During your property manager's annual rental appraisal, consider asking these questions:

  • When is the appropriate time for a rental appraisal?
  • What is the optimal rent to remain competitive in the local market?
  • What are tenants searching for in properties?
  • How can you enhance the value and appeal of your investment?

Your property manager, being a local specialist overseeing similar properties in the area, can provide valuable insights to help you maximize rental yields.

SECTION 9

ARE YOU A SEASONED PROPERTY INVESTOR LOOKING FOR BETTER RESULTS?

Property Brokerage Property Management Services

PROPERTY MANAGEMENT SUCCESS

Are you a property investor aiming to maximise returns and achieve long-term financial goals?

If so, this guide is tailored for you. Developed in collaboration with our seasoned property managers, it offers proven insights into maximising returns and optimising your property investment.

SECTION 10

MOVING FORWARD

What's Next?

GET A RENTAL APPRAISAL

Are you looking to maximise the potential of property investment? Get a free rental appraisal with a local Property Brokerage Property Manager.

*HOW MUCH RENT SHOULD I CHARGE?

DOWNLOAD OUR MAXIMISING YOUR INVESTMENT PROPERTY'S POTENTIAL GUIDE

A key goal for all investors is undoubtedly to maximise returns, but you may be unsure how to achieve this. This guide has been created to help both new and experienced investors ensure they have the right knowledge to set themselves up for success.

*GET OUR PROPERTY INVESTING GUIDE