Two Ways to Structure an Investment Property

Two Ways to Structure an Investment Property

Option 1: Positive Cash Flow Property

Structuring An Investment Property | Locate Property

Most Real Estate investors ideally try and target this kind type of structure for their investment property. Especially with the interest rates being at an all-time low. A historic low in fact. The idea is to achieve more rent from the property than all of the expenses to hold and operate that investment.

The great thing about a Positive Cashflow Property is that rents can cover expenses, management fees, property taxes, and insurance premiums-leaving you with extra income out of pocket. IE. Positive Cashflow

A Real Estate Investor can have the following when they invest in this type of structure:  1) Tax Benefits 2) Long Term Capital Gains 3) Excess Rental Income 4) Potential Appreciation. WHen this strategy is done right, this will allow for more properties to be added into one’s portfolio in a shorter amount of time.

Option 2: Negative Cash Flow Property

This is the traditional Real Estate Structure or the one that you hear the most when agents or talk about buying Property. This is also referred to as Negative Gearing. These days, most Real Estate Investors do not have this structure when they first start out in Real Estate Investing, but rather prefer to target a positive cash flow property instead due to the low-interest rates.

A Negative Cash Flow Property is when your income does not meet your expenses. In other words, the rent doesn’t cover all the bills/costs.

Positive and Negative Gearing What are they and which one should you aim  for? — Wealth Efficiency

This structure can have additional tax benefits such as the depreciation of the Real Estate Property and is popular amongst investors that are making the most of capital gains. Sydney Properties for example are more likely to be Negative Geared vs a Brisbane Property etc.

The investors in this structure are generally Real Estate Developers who will spend significant amounts of money to improve the Real estate market value. For a negative cash flow investor, their goal is not necessarily to produce a positive cash flow property, but rather it is to obtain a Real estate asset that will appreciate in value.  This Real Estate Investor structure their Real Estate investing for appreciation and gains down the line instead.

In order to do this type of Real Estate Investment correctly, thus protecting your downside risk, you need to be smart about the Real Estate Market that you are investing in.  This strategy is very Real Estate Market dependent, not all Real Estate Markets perform well in these times.

The structure that you choose will depend on your personal set of circumstances in the Real Estate Market, your Real Estate Goals, Real Estate Investment Education, and Real Estate Investment Experience.

Please seek Independent property-specific advice from a trusted professional before investing in property. The Property Market isn’t always up and your personal position dictates your ability to invest now just now but to be held in the event circumstances change.

Here Are 5 Ways To Reduce Tax On Your Investment Property

Here Are 5 Ways To Reduce Tax On Your Investment Property

It’s tax time! That means we’re all heading for our calculators (or accountants) to try and find out what sort of reprieve we can receive from the tax man.

Owning an investment property can be a great way to build wealth. However, with the ever-increasing costs of living in Sydney, Melbourne & now Brisbane.   It is important that investors get every last cent back on June 30th, 2021, and here are Locate Properties’ top 5 ways to maximize the return on your investment.  

Here are 5 ways to reduce tax on your investment property. 

1) Track all of your expenses 

Make Sure To Track All Your Expenses | Here Are 5 Ways To Reduce Tax On Your Investment Property | Locate Property

The property game is no different from any other taxing business, in order to win you must be able to account for all of your expenses. By using a property management software such as remind me, which has property specific reports built-in, including capital works reporting and depreciation tracking,  you can be sure that you are claiming back every cent possible

2) Appoint a Property Specialised Accountant

Appointing a property-specific accountant is a huge help when it comes to property tax. With knowledge of property and its depreciation rules, they are able to ensure that you have all the right supporting documents for each property claim that you make.

3) Be clear in your reporting & track expenses including trips to the property

Reporting & tracking expenses | Here Are 5 Ways To Reduce Tax On Your Investment Property | Locate Property

One of the biggest issues with property investors is the failure to track property-related expenses. This may be a trip to the property, getting a plumber in for an emergency call, or even a fitting from Bunnings. By having these expenses tracked with property-specific reports you can ensure that every cent is claimed back as a deduction

4)  Claim Plant and Equipment Depreciation

Property improvements such as new air conditioning units, or new hot water systems can all be written off. You are able to claim plant & equipment depreciation on these items, ensuring that you have appointed a Property Specialist Accountant.

5) Pay off the principal mortgage as quickly as possible

The more of your capital you can get rid of, the less amount of tax you will need to pay each year.  The reason behind this is property depreciation.  The capital amount will be able to be written off each year with the property being in your portfolio for more than 12 months.  If you pay down the principal quickly, you will reduce your tax payable on property assets.

**Disclaimer:  This article contains property investment and property management information. While care has been taken to ensure the property content is accurate at the time of publication, property details can change frequently. Locate Property makes no representations or warranties as to the accuracy of the property data contained herein, which may include linked websites that are not property specific or property representatives such as developers or agents.

5 Ways to Improve Your Home To Get The Highest Possible Rental Return

5 Ways to Improve Your Home To Get The Highest Possible Rental Return

The key to maximizing rental value is all about the little things. Even a small improvement can lead to significant increases in rent prices and Rental Value. In this blog post, we will share 5 home improvements that you can make to increase Rental Price for your property!

Take a look at improving your landscaping

Improving Your Homes Landscaping | 5 Ways to Improve Your Home To Get The Highest Possible Rental Return | Locate Property

A beautiful home will have a higher Rental Value, meaning you can charge more rent. Ranging from simple solutions, such as trimming trees, creating a pond or planting flowers to more complex solutions, such as installing a pool, there are many ways you can improve your landscaping to add significant value without breaking the bank.

Keep your walls freshly painted

Some Rental Properties will require tenants to paint the interior themselves. If you’re not into letting your property go without a fresh coat of paint, or if you don’t want to risk having the walls repainted by someone else and costing yourself money in the long-run, it might be worth considering painting rooms before it’s time to search for a new tenant.

Renovate your bathrooms and bedrooms

Freshen up your Rental Property by renovating bathrooms and bedrooms. This can range from simple upgrades, such as a new tub or shower head to more complex updates like installing a water-saving toilet or replacing an old carpet with hardwood flooring.

Increase the number of living spaces or bathrooms

Adding a second bathroom or an extra bedroom can turn your Rental Property into an investment where you have the potential for even more tenants on the same lease. In addition to that, creating more bedrooms will allow you to accommodate larger families looking for Rental Properties with plenty of room!

Make the property pet friendly

Make the property pet friendly to attract more tenants | 5 Ways to Improve Your Home To Get The Highest Possible Rental Return | Locate Property

Pets are a Rental Property’s best friend. Pet-friendly homes can considerably increase the attractiveness of your home to potential tenants. By opening up your investment property to pets, you’re opening up your chances of a higher rental return!

How to Treat Your Investment Property Like a Business

How to Treat Your Investment Property Like a Business

When questioned on their motives, most investors sight financial freedom as one of the major goals behind their investment property acquisition.

However, looking at the ‘bigger picture’ is crucial in ensuring you don’t wind up investing more time then the property is worth.

It’s crucial to ensure you treat your investment like a business.

A Business Should Be An Attractive Buy

Why did you acquire the property in the very first place? It is no use putting your hard-earned money into a property that will be difficult to leave when the time comes.

  • What is it that makes people want to live here?
  • What is the demand for properties in the area?
  • How many days are they on market? Etc

Any of these questions could lead to red flags and, most likely, an investment decision that may come to bite you later on. Ensure you always use foresight and apply calculated analysis during your purchase.

A Business Should Have Growth Potential

There is no point getting into a business if it just going to stand still turning over a minor profit. Every element of a business needs to be able to cover it’s expenses and your investment property is no different.

To be able to scale you need to be able to leverage other people’s resources, like rental income, tax benefits and any other income that allows you to minimize the risk in your investment and grow.

A Business Should be Able to Run Independently of You

You have a job and not a great paying one at that if your financial investments can’t work without you.

You definitely need to have your financial investments running like clockwork without the need for you to manage every decision or it simply isn’t worth it and you won’t be able to scale.

You need to be able to work rest and play without worrying over your financial investments. When you understand time is worth more than cash, you are really wealthy.

Why a Successful Property Investor Never Works Alone

Why a Successful Property Investor Never Works Alone

Everything in life that you wish to truly excel at involves a sharp learning curve and your journey as a property investor is no different.

One of the most important lessons all successful investors have to learn is to look at property investment as a business operation involving a number of key players.

There is no one alive who can go it entirely alone and you soon realise that it requires a great strategic advisory group around you to ensure your financial investment is performing the best that it can be.

So who are the potential players you will need in your team? 

  • Accountant
  • Lawyer
  • Mortgage Broker
  • Financial Planner
  • Property Advisor
  • Wealth Coach

All of the above are going to have a major effect on how well your investments perform and it is crucial that they have your trust and are able to work together in your best interests.

Then of course there is also the role that your property manager plays in this team as well, after all you have actually spent numerous thousands of bucks on an investment property.

Why You Need A Property Management Team | Locate Property

It’s vital to make sure that your residential property manager recognises their role within your team as a successful property investor. It is their job to optimise the return that you’re obtaining, which when executed correctly, is an invaluable asset to your investment team..

Your property manager exists to manage your “business”, your property, on behalf of you, the client. They offer customer support in your place to your business client, which is your tenant.

It’s easy to see your property manager as merely a rent collector. Still, it’s important to understand the nitty-gritty to ensure you make wise strategic decisions long term regarding your investment property.

They’re going to promote your property, take individuals through the inspections and application process. They’ll likely handle your rental defaults, and they understand the legislative framework that your investment operates within.

They’re going to review your rental amounts and also ensure that you’re optimising your return. They’ll manage maintenance on your property, and also take care of emergency issues that require a quick response and solution.

What about if your tenant intends to break the lease early? Or you need you to break the lease? Do you know the legal obligations surrounding those scenarios and/or the time to enforce the correct procedures?

Your property manager is also likely handling water invoicing, bill settlements and a number of other regular tasks that they tick off as your manager.

And let’s not forget the most integral part, managing the communication and smooth operation of all the above elements and associated parties.

Everything You Need To Know About Property Management | Locate Property

I hope that gives you an idea of how much is involved in running your investment “business” effectively and successfully and why it’s, actually essential that you pick a property manager that understands the importance of their role and goes above and beyond to deliver.

Property management is actually quite a big task with a lot of components so you don’t want to work with somebody that doesn’t understand the basics of the game.

Realising the importance a property manager has in your property investor journey is a big part of long-term property investment success.

Like every other person you work with, your property manager needs to be a team player who understands the bigger picture of your investment objectives and ensure their every move is in your best interest.

Hopefully, that’s given you plenty to think about and please get in contact with us if you have any queries.

Ten Must Do’s Before Putting Your Property on the Market

Ten Must Do’s Before Putting Your Property on the Market

So you’ve decided it’s time to put your property on the market? That’s great, but if you want to get the absolute most out of your property then preparation is your best friend.

We’ve put together our Top Ten list of tips and tricks that you can implement to give you the best chance of getting top dollar from your sale.

1. Have Every Surface Glowing

Give your property every chance of selling by making it glow. Buyers who see a glowing home have an easier time envisioning themselves living there and removes any easy points of criticism.

2. Spruce Up The Entrance

Hallways, doors and open spaces produce a terrific first impression and can help potential buyers to view the house as a home.

Try a fresh colour on the front door, a welcoming rug and some peaceful artwork to draw prospective buyers into your house.

3. Brand New Welcome Mat 

A fresh welcome mat adds style to your entryway and enhances first impressions. Having people remove their shoes before entering the premises adds class to potential evaluations and encourages great feedback and respect for the property.

4. Landscaping and Street Appeal

Street appeal is crucial to the sale of a property. Cut down, tidy up and clear out any plants, grass and shrubs to help impress potential buyers and create a great first impression and connection to the house. 

Never ever ignore the power of an appealing street frontage to make sure people pop in to inspect the home.

5. Pest and Building Inspections

Organising a building and pest inspection will ensure you can get rid of possible issues ahead of time. 

Use the info collected from the examination to offer buyers a benefit and peace of mind when working out your sale price.

6. Keep Design Neutral

Everybody has their own individual style they like to contribute to their house. The smart advice is to take your colours down a shade to show potential buyers a house that they can make their own.

Giving them room to see how it will match their furniture, artwork and soft furnishings is all ways best practice. Keep it simple and sophisticated and let the buyers imagination run wild.

7. Clean the Exterior

Giving the outside of your home a detailed clean is an efficient and economical way to make your house look more appealing and more likely to stand out to prospective buyers. 

Expert home cleaners are available to scrub your home’s outside from the rain gutters to the ground in just a couple of hours, so no excuses.

8. Minimise Contents

Time to begin packing up and making the home as free of your presence as possible. A house must present as simple to maintain and spacious. 

It ought to be ready and for the residents to move in; make sure possible buyers can see themselves living there from the moment they pull up into the street.

9. Leave it to the Professionals

Let your agent work for you. Do not spend time going evaluations when feedback is the next best thing to getting offers. People are most likely to offer more honest feedback when they can go over with their ideas without fear of upsetting the owners. 

So trust in your agent, let them do their thing and take care of everything that’s in your control.

10. De-Odour 

An extensive home clean will help to present your house as a clean and fresh environment. Have a good friend assess how your home smells and guarantee any family pet beds and other smelly products are eliminated and the area aired before opening the home for inspection.

Selling your property can be a fun and valuable exercise and if you follow these ten easy steps you are sure to be well on your way to getting a great price.