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5 tips to help you make money from property

Published on September 23, 2014 4:01 PM EST

If you’re weighing up various investment options to see which will get you the most bang for your buck, property could prove to be a great option. But before you walk blindly into the world of property investment, here are five things you can do to ensure your investment decision will prove to be the money maker you envisioned.

1. Have a strategy

Your first step when thinking about purchasing an investment property is to work out what your strategy is. There are two general strategies when it comes to investment properties—positive gearing and negative gearing.


A positively geared property is where the rental income earned from the property is greater than the cost of owning the property, meaning the rental surplus is profit. In contrast a negatively geared property is where the rental income doesn’t cover the cost of owning the property. In this scenario, you can make money from the reduction you can claim on your taxable income and any growth in the value of the property.

2. Know the market

Before purchasing a property it’s well-worth doing a little research to familiarise yourself with what’s happening in the property market.

A good place to start is by visiting a few leading real estate websites to get an idea of what the type of properties you’re looking at are selling for and the average weekly or monthly rental yield. Most sites will have a wealth of market data which can give you a good idea of what’s happening in the market in a particular location at the moment.

Once you’ve narrowed down your preferred location, local real estate agents can be another great resource. They’ll have an in-depth understanding of what’s happening in the local market, including how easy it is to find and keep good tenants.

3. Don’t over capitalize

One of the biggest mistakes investors make is overcapitalizing on their investment property. When searching for the right property, remember that you’re shopping for an investment rather than a place to live in yourself, so keep your emotions out of your decision making.

Make sure you crunch the numbers so you know how much rent you can realistically expect to generate in comparison to the price tag. You’ll also need to understand what your holding costs will be when the property is vacant to ensure you can cover them if you need to and you should also consider if you could afford an increase in interest rates.

4. Choose your property wisely

Pay some careful consideration to the type of property you purchase as some property types will perform differently depending on the location.

Whether you’re considering an apartment, house or unit, there are various benefits and downsides to each. Then you’ll also need to consider if it’s a smarter move to buy an established property, buy an off the plan apartment or townhouse or purchase a house and land package from a home builder.

Your best bet is to look at the other properties listed for lease in the area and how much they’re advertised for to gauge the level of demand and competition in the area.

5. Know what you can deduct at tax time

If you don’t understand how an investment property can benefit you at tax time, it’s well worth doing some research to find out what deductions you may be able to claim come as they can add up.

While what you can claim will vary based on where you buy, generally you should be able to claim things like advertising and property management fees, loan interest and fees, council rates, strata fees, depreciation on fittings and fixtures, repairs and maintenance and building and landlord insurance.

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