Investment Tips, Questions and Answers

Why Invest In Property?

People invest in property to create wealth. This is different to buying a home that you will live in for the next 5, 10 or 20 years; it’s about buying property that makes you a return on your investment.

The main reason people invest in property is that they realise their superannuation isn’t going to support their current standard of living, even though they’ve been contributing to it every day of their working life. On average, to receive half your current annual salary to live on once you retire, you will need to contribute 12% of your income into your superannuation fund every year of your working life. If you’ve been working for 40 years and have only been putting aside 9%, you will need to prepare to live on less than half your current salary.

To make up for this difference, a lot of people decide to invest in property for a few years to increase the amount of money they can retire on.

What can I expect in retirement?

Today’s retirees are providing a sobering lesson for future generations. Poor retirement planning has cost them their lifestyle. If you want to retire wealthy these days, you usually need to put aside money and built up a nest egg on top of your superannuation. This is where property investment can help.

Isn’t property investment for rich people?

Statistically speaking, more than 70% of property investors currently earn between $35,000 and $40,000 a year. Most millionaires (90%) become wealthy through investment in real estate.

Do I have to have a 20% deposit to get into property investment?

If you have owned your first home for a couple of years, you will have built up a fair amount of equity that you can use as security on your investment property.

The other benefit is that banks will allow most of the additional fees such as establishment fees, solicitor’s fees, stamp duty and such to be rolled into the cost of your loan for your investment property. So it is possible that you can start investing in property now based on your current equity without having to save thousands in a bank account beforehand.

What can I do to make sure my property investments do perform?

Property investment performance refers to how much a property will grow in value at minimum expense.

Some issues to look out for include:

• Structuring your loan correctly
• Ensuring the loan is in the right name
• Avoid purchasing high maintenance properties
• Ensure you maximise the amount you can claim in non-cash tax deductions
• Try to use an average rent for that area and minimise vacancy periods
• Don’t pay too much for a property in the first place – you don’t have to love it as your dream home, it’s an investment property
• There may be little potential for capital growth in some properties  

Before looking for investment properties, come in and have a chat to us about any questions you have about the location and type of property most suitable for your situation.

What if we can't find a tenant for our investment property?

Vacancy can be the result of two things:

• The amount of rent being asked; or
• The location of the property.

If you can't find a tenant at the advertised rent, then lower the rent until a suitable tenant is found. Maloney’s knows the Canberra market and can advise you on rates.

Your property should be in a good location where there is a demand for rental properties; e.g. close to transport, shops, schools and employment.

What is the rental property market like?

The rental property market is one of the few investment markets not dominated by investors. And investors in this market do not all rush to sell out at once when times get tough. Everyone still needs a roof over their head whether they rent or own.

This trend provides stability and reliability in the rental property market and forms a barrier against substantial down-side in the market place.

Historically, what happens investment-wise with residential real estate?

Property value increases with a compound effect. As each year passes growth occurs on top of growth. If a property is worth $100,000 today, and next year it increases in value to $110,000, then the year after that it increases at 10% again, that is $100,000 plus 10% (or $11,000), taking its new value to $121,000, and on goes the escalation. Its exponential growth accelerates at a faster rate as each year passes.

Property wealth is slow at first, but eventually, if you make the right start, no matter how small, it comes in abundance. With well thought out property investments, all you need is time, the right information, and patience.

We've only got about 9 years to retirement, have we "missed the boat"?

Definitely not. No matter what stage of life you are at, by setting goals now and planning ahead, you will prepare yourself for whatever opportunities and obstacles that may present themselves along the way.

For most mature people, the greatest fear is that they will live longer than their money. Fear of poverty is real in everyone, but it’s something you can safeguard yourself against with good investments.

Please note that these tips are to be used as a guide only.  Maloney’s is happy to sit down with you at any time to discuss your investment needs and options. Before you decide to go ahead with any investment, it would be wise to speak to your accountant or financial planner first.