Buying an investment property is a smart way to strengthen your financial flexibility.
For most people, buying a property is a significant investment of their time and money.
There is also a lot of financial and emotional complexity.
The nerve-jangling reality is that one ill-advised step, can have an overwhelming impact on your quality of life and finances.
In an insightful discussion with Rick Nieuwenhoven, Chief Executive Officer at the Nieuvision Group & Professionals Modbury, we discovered some strategies to better manage your funds without compromising your needs.
“The most common question I get from investment property clients is: How do I manage funds to avoid compromising with my needs?”
What this person is actually saying is “I want to buy an investment property but I don’t want my lifestyle impacted“.
I’ve had quite a few people give me this feedback, and I understand right.
Firstly, we do have to compromise sometimes, if we want to get something we might need to give something up.
At our company, we do have a Lifestyle Planner. This Lifestyle Planner is here to set goals with you and also integrate this new property process purchase into your portfolio.
And also your lifestyle, so that you understand all of the things that go around it.
However, the fundamentally important part of this question is – old property vs new property.
Old properties generally will cost you money to run, and the reason is that they don’t have depreciation on them.
New properties have this non-cash outlay, expense to your benefit, which is called depreciation. That’s fixtures, fittings and also the building itself.
We tell the tax office that you have purchased a new investment property, and then the tax office, in turn, tells your employer because of this property, there is an “x” amount of tax that you no longer need to pay.
The employer then takes that reduced amount of tax out and puts it back into your pay cycle.
There Is A Two-Fold Effect For You
One is you are running more money through your offset account against your home loan, so you are paying your mortgage down faster.
The second effect is it does not impact your lifestyle because you have got that you usually are paying in tax.
Now, they are available to help run your investment property.
The Most Critical Factors For Property Investing
1. Property Location
- Neighbourhood’s status.
- Proximity to green space, markets, transport hubs, schools and scenic view factor prominently into the property.
2. Profit Opportunities And Expected Cashflows
- Cost-benefit analysis of mortgaged loans vs. value appreciation.
- Anticipated cash flow from rental income.
- Available tax benefits (benefits of depreciation).
3. Investment Purpose And Investment Horizon
- Buy and Sell – long term or short term.
- Buy and Lease.
4. New Construction Or Existing (Old) Property
- Review recent surveys, property deeds and appraisal reports for an existing property.
- Look for value-added opportunities, significant stamp duties and easements or caveats on the title.
We're Here To Help You
If you are thinking of buying an investment property and worried about how it will affect your financial health and lifestyle – we are here to help you make a confident decision.
Let’s connect over a no-obligation phone chat and help you understand the jargon like substantial appreciation, steady cash flow, tax benefits, and competitive risk-adjusted returns and help you get your next investment property purchase underway.
