Property investors often ask whether their strategies should be influenced by recent market conditions.
As Benjamin Franklin once said, “an investment in knowledge pays the best interest.” So it’s also logical to say that investors who do their research and increase their knowledge about the property market will also see better results from the strategies they put into place.
That being said, no matter what the external market conditions, there are always tried and true factors that a property investor should be aware of.
Which leads us to the four ways property investors make their money, as mentioned in the latest article from Metropole Property Strategist, Michael Yardney.
The four ways property investors make their money:
- Capital growth – the increase in value of their properties
- Rental returns – which provide cash flow
- Tax benefits – such as depreciation allowances and negative gearing, and
- Forced appreciation – this is where an investor ‘manufactures’ capital growth through renovations or development.
Whether you’re a first time investor, you already own an investment property, or you’re planning on buying your second or even tenth investment property, it’s important to consider all of the above factors.
If you’re buying a new property, look at the historical growth of properties in the area, local employment drivers and the proximity of the property to local services and facilities. Also ask your Real Estate Agent for a rental appraisal of the property. Most importantly, ask a Quantity Surveyor to provide an estimate of what depreciation deductions will become available once you have purchased the property and it becomes income producing.
If you already own an investment property, if you haven’t already done so request a tax depreciation schedule from a Quantity Surveyor so you can claim the maximum deductions available as part of your annual tax assessment.
If you’re planning on renovating, also make sure to get a schedule before and after you complete the renovations so you can claim the remaining depreciable value of any removed assets as a write-off in the year the assets are removed.