Hot Tips For Investors – Understand Your Numbers
Can you believe we are already a third of the way through 2018! As the year has progressed, so too has the market confidence and overall market condition as Perth starts to slowly gather momentum. Investor enquiry is now on the increase, initially from just the East Coast and Overseas but now more and more from local investors awaking from a very long hibernation.
When investors start on their search for the perfect property there are many places they will start – often they speak to their bank or call a broker to see how much they can afford to borrow or in a booming market they may get their property advice at a friends BBQ or from their friendly Uber driver… whilst we are not at that stage yet it is good that some discussions are starting to happen now.
The simplest strategy that we would suggest, before sitting down with any professional, is to work out your current income and expenditure and how much per week or per month you can afford to put towards an investment property. Start by looking at your past 6 months cash-flow and work out how much surplus income you have saved or if you have had any ‘one off’ expenses like a big holiday or a new car – then work out how much you think you could save over the next 6 months. If you already have your own home then you may have some equity built up and that could help you leverage into a new property quicker, otherwise how much cash do you have or can you save to use as a deposit? Once you know how much income you can spare and how much of a deposit / equity you have you can move on to stage 2 and look at the typical cash-flow of an investment property.
Income from a property is generally easy enough to establish but expenses can vary and include interest as well as other costs such as council rates, water rates, insurances, strata levies, management fees, repairs and maintenance, vacancy etc. Now that you have an idea of the income and all of the property expenses you can work out roughly how much the property will cost you each and every week, month or year. The additional benefit that is often harder to work out is the depreciation or negative gearing tax refund you can get from owning an investment property – and whilst this can help with cash-flow we will normally suggest to think of this as a yearly bonus that can be used to pay down some debt or perhaps take the family on a well-earned holiday. (Yes – a work/life and investment/life balance is a crucial part of any successful strategy!)
At Celsius we take the cash-flow aspect of buying an investment property very seriously – we want our Clients to be able to buy property they can afford over a very long period of time. Celsius Finance was established as an in-house broker to ensure that both the structuring of the finance and the deal offered by the banks best suits our Clients and not just the bank! Please feel free to call on these cost and obligation free services anytime – whether before you have started looking for a property, whether you have just found a property or even just to make sure you are getting the best deal on your current lending.
Now that all the preliminary work has been done the next step is to find the right property in the right location… We believe buying a well located property relatively close to the city and fringes (where majority of people work) with great access to shops, restaurants, amenities and public transport is the first step and we will go into this in more detail in next months newsletter… In the meantime, feel free to give us a call at anytime on 1300 CELSIUS or 6144 0700 to either pick our brains or to arrange a quick catch up where we can work out the figures for your own particular scenario.
Warm regards,
Richard
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