2015 was a very interesting year for property investors. We’ve had unprecedented growth throughout the Sydney and the Melbourne market. This meant that it became harder to buy in these markets.
Rental yields have been decreasing, meaning that investors have less cash flow available to ensure their numbers stack up and owning an investment property remains affordable.
APRA has also increased regulation on the banks to slow investor lending. What this has meant for new investors is that it is not as easy to get a loan as it has done in the past. For existing lenders, the banks actually increased interest rates, which is something we haven’t seen for investors only for some time.
I think it is very important to learn from the past and to be prepared for what a New Year will have to bring. With this in mind, we would like to share some of our resolutions and tips as a property investor in 2016.
Go outside my comfort zone
Often investors will look close to home buying an investment property, especially when it’s a first purchase. This year, look at the historical growth of areas outside your comfort zone, perhaps surrounding suburbs or even other states that could provide better returns.
Don’t follow the herd
Investors tend to rush into hot spots and often are guilty of overlooking other possibilities. It’s important to look at the rental yields which can be achieved as well as to do your research on price growth in the area over recent years. Look for the long term possibilities in an area, rather than just for properties which may offer only short term gains.
Look at the complete picture
Ask yourself the question, ‘do I have a real understanding of the costs involved in holding an investment property?’ While many investors will find out what income can receive, less rarely will they find out all of the expenses involved. A depreciation estimate allows investors to crunch their numbers so they can get a complete picture of their situation including what deductible expenses they can claim before they decide to buy a property.
Budget now for the future
Everybody gets busy and sometimes attention to your budget can easily get left aside. It’s important to check in on your budget regularly and make improvements along the way so you don’t get caught out at the end of financial year.Consider ways to take advantage of available deductions throughout the year rather than waiting such as a Pay As You Go withholding variation. These valuable dollars can be used for repairs, maintenance and even improvement on your property now rather than at the end of the year, or put into an offset account to help reduce interest on your loan.
Learn from the experience
If you have invested in property in the past, your experiences can help guide you when making decisions in the future.Sometimes the best lessons are learnt from the mistakes you have made and sometimes they come from the successes you have had.Consider reassessing your existing portfolio. Ask yourself while doing so what improvements you can make to get a better result from the properties you already own as well as potential new purchases in the future.It is also important to continually keep educating yourself. Watching market predictions, hot spots and evaluating the data can assist; however remember that the market can change and sometimes be difficult to navigate.
Simply by seeking advice from the experts when you need it and following these handy resolutions, your 2016 investment journey is sure to be a successful one.
Best wishes for the New Year from all the team at BMT Tax Depreciation. We look forward to assisting you with all your depreciation needs throughout 2016.