Step by Step to Choose the Right Australian Property for Indonesian Investor
Hello guys, a warm welcome to our website at Rajaproperti.id – a place where you can find, purchase and finance Australian property for investment opportunities.
In this part of the education series, we want to share our knowledge on choosing the right Australian property for investment. This is by no means an extensive list of steps we did to analyse the property, but it serves as a guide for beginner investors in Australian property.
First thing first. factors to consider when choosing an investment property:
• Location of the property and potential for future growth and expansion
• Access to public transport, such as trains, buses, main roads and access to motorways
• Proximity to public and private schools (childcare, primary, secondary, tertiary and universities)
• Neighbourhood and demographics and urban planning
• Property design, lifestyle and environment
• Nearby facilities?
• Shops and major shopping centres
• Medical facilities (doctors, specialists, chemists, hospitals)
• Recreational (parks, clubs, community centres, golf courses etc.)
• Dining and entertainment (restaurants, bars, cafés)
Some demographic factors to consider:
• Current suburb population and potential for future growth
• Current and future demand for accommodation in the area (rental demand & vacancy rates)
• Local industry and employment opportunities
• Suburb household structure and profession
We thus created 6 rules to follow when investing in property. Whether you are a first-time investor or manage several investment properties, the following 6 rules will provide a solid framework for ensuring your investments continue to generate returns over their lifetimes.
Rule 1: Follow on the advice of experienced professionals
Advice should be sought not only from people with theoretical knowledge, such as financial advisers and accountants but also from those who have practical experience and success in property investments. The best advice for property investment will come from those individuals who have had years of experience searching for and managing their property portfolio successfully.
Rule 2: Positively geared properties
Having a positively geared investment property is vital to obtain a healthy return on your investment. By obtaining property with high rental yields, your property will generate higher levels of cashflow to cover the up-keep costs of the property.
= rent per year/property price
= $15,600 per week year / $450,000
A rental yield between 4.5 – 6.0 % is considered high and will generally cover the outgoing costs of the properties. Any subsequent additional costs to support the investment will be minimal on your behalf.
Rule 3: Location and position
The key to selecting a property that will generate good returns on your investment is to choose a good location and position.
When you research for your next investment property, it is vital that you stay objective and select areas with good opportunities for growth. Buying property in an area solely because you are familiar with the neighbourhood is a bad mistake.
Locality features to look out for a specifc type of property:
- Proximity to business districts
- Areas in high demand
- Close to shopping centres
- Access to public transport
- Nearby infrastructure
House & Land:
- Located close to public transport
- Access to major arterials
- Close proximity to schools & universities
- Nearby major shopping centres, medical facilities, doctors, hospitals, recreational parks, sporting facilities & community centres
Rule 4: Keep property tenanted
Cashflow from a tenanted property contributes significantly to whether an investment property becomes positive or negative gearing. As previously mentioned, you need to select a property that will return high rental yields, but also in high demand to ensure leaving tenants are quickly replaced by new tenants.
The vacancy rates of a suburb is a good indicator of the rental demand, with low vacancy rates suggesting there is a surplus of tenants and not enough properties.
When considering an investment property, select properties that are situated in close proximity to the type of amenities and services that tenants will favour, such as, public transportation, easy access to freeways, shopping centres, schools, hospitals, medical centres, etc.
Rules 5: Maximise tax benefits
One of the major attractions of investment properties is the ability to depreciate the cost of the building and certain fixtures and fittings. The effect of this is a substantiate reduction on your personal income tax.
There are many more deductions on investment properties that can contribute to lowering your personal income tax, even to the point of lowering your income tax bracket.
Rules 6: Finance strategy
An interest-only investment loan is generally the best loan structure for a property investor who can foresee the property gaining in value over time. An increase in equity will insure a profit is made on the eventual resale of the property.
In this type of strategy, the investor has monthly repayments restricted to the paying off of the interest component of the loan only. This means that there is a significant saving in loan repayments and an increase in cash flow. Interest only loans also provide the following benefits:
- The real return that you are getting for the property is easier to work out by clearly separating the interest from the principal.
- There are big financial benefits from tax deductions you can claim on interest-only payments as there are no tax deductions allowable off any payments made off the principal.
- Your monthly repayments will be much lower than they would have been if you had been making both interest and principal reducing repayments.
That’s it for the 6 rules. If you have any questions, please feel free to ask any questions below in the comment section, and we will reply to your questions.
A bit about us:
At Rajaproperti.id, our investment managers discover, analyse and filter the best investment opportunities for Indonesian Investors to buy Australian properties. These are properties that represent exceptional value, long term returns, minimum risk and sound capital growth. And not only that, we provide services from the start until the end of your Australian property ownership. We help you with selection, guidance, purchasing, financing, maintenance and even resell when you need it. Our business require us to deliver high-quality services to our clients.