5 boxes to tick before investing in real estate
6 May 2021 | Kennas Client Resources
The real estate market in parts of Australia is ‘running hot’ as a result of record low-interest rates for borrowing. Many people are keen on the idea of owning real estate, as opposed to ‘non-real’ estate, like shares, bonds and superannuation investments. There’s no lack of voices doing their best to tempt you to dip your toe into the property market right now, if you were considering this option. But first – read on.
Build your knowledge base
While there are legitimate gains to be made, remember that if it sounds too good to be true, it definitely is. It’s vital to master the intricacies of maximising your investment returns, protecting your assets and successfully minimising your tax obligations. The ATO publishes extensive guidance about property investments, and that’s one good place to start building your knowledge base.
Get an expert view
You just can’t get away from all the advertising about fantastic returns and once-in-a-lifetime opportunities. Because there can be a strong emotional element at play in the marketing of investment property, gaining well-considered advice from a financial expert, such as your Kennas advisor, is an essential step to take – before you dive in! We’ll help you cut through to the bottom line so you can maximise your returns.
Know your cash flow and returns
One important exercise to do when you’re considering the property market for your investment action is analysing exactly:
- what to expect in return for your commitment
- over what time frame
- what you may need to outlay as time goes by
While the boom and bust cycle of real estate is well-known, this is highly influenced by local conditions and economic considerations. These factors can be micro – like the employment profile or types of schools in the town or suburb, or macro – like a global pandemic that caused the massive economic impacts we all felt in 2020 and continue to feel today.
Yes, there are many calculators and tools out there claiming to deliver a solid analysis (in 5 minutes or less!) But sitting down with your Kennas advisor and having an in-depth discussion is worth its weight in gold so that you can move forward with confidence.
Become a knowledgeable landlord
For those who already have a property portfolio of any type, we hope it’s a positive and rewarding investment. We’re constantly on the lookout for ways to help our clients stay ahead by arming them with the latest information. We want our clients to be in control of their financial success, so here’s Kennas’ top list of 10 actions all landlords must get right:
- Record keeping – evidence of all income and expenses, to minimise future capital gains tax and maximise annual allowable tax deductions.
- Ensure your property is genuinely available for rent. Check out the ATO’s definitions here.
- Handling initial repairs and capital improvements. Taxation treatment varies widely – find out more here.
- Claiming borrowing expenses.
- Claiming purchase costs.
- Claiming interest on your loan.
- Managing construction costs correctly for maximum deductibility.
- Claiming the right portion of your expenses. The ATO addresses many variable circumstances that can affect the percentage you can claim.
- Co-owning a property. Understand the legalities of different types of ownership and which best suits your partnership.
- Managing capital gains or capital loss when the property sells.
Tap into your resources
Have you read our booklet for current and future property investors? ‘Are you thinking of investing in the property market?’ suggests some strategies you should consider to keep ahead of the taxman and increase your understanding of the potentials, both positive and negative.