Along with shares, property is one of the most widely used vehicles for investment. Tens of thousands of properties are bought and sold in Australia every year, many of these for investment purposes. While no single strategy is right for every investor, these six fundamentals are can be adapted to enhance any property investment strategy.
1. Obtain Professional Advice
Any type of property investment strategy requires some level of input from professionals, whether it’s a conveyancer, accountant, or agent. An agent can assist with sourcing appropriate properties, and your accountant will provide essential advice on tax strategies and purchase structures. A conveyancing professional can assist you throughout the entire process, arrange important checks and inspections, and ensure that you comply with all the legal requirements for a valid contract and sale.
Along with smaller households or the growth of the single person household, one of the most distinctive trends in the Australian property market is the rise of the young property investor. According to a 2011 study by Mortgage Choice, almost 43 per cent of younger investors are opting to buy an investment property before their first home. We look at some of the investing secrets from Australia’s younger investors.
Australia’s Young Property Investors
Generation Y refers to those born around 1979 to 1995. Savvy and disciplined, these young investors are happy to work a second job, take a higher paying job, make lifestyle sacrifices, and commit for the longer term to secure their first investment property and delay owning their first home. Along with recognising the need to get into the market as early as possible, these younger investors know when to seek the advice of a conveyancer, accountant, or real estate agent.
1. Rent to Live, Buy to Invest
Tax considerations form a large part of any successful property investment strategy. For property owners and investors, working with professionals such as an accountant, financial planner, or conveyancer can help streamline your strategy and help you better understand regulations that pertain to tax and the purchasing and selling process. In this article, we look at 10 practical ways to reduce your tax liability and ensure compliance.
1. Capital Gains Tax
Capital gains tax (‘CGT’) is probably one of the most important tax considerations for those planning to sell their property in the short or medium term. In Australia, a CGT event occurs when you sell a property (or other capital assets) acquired after September 20, 1985. The CGT you pay depends on your taxable income at the time you sell the asset.
However, exemptions apply. The most well-known exemption is the main residence exemption, which means CGT is not applicable when the property has served as a main residence. A 50 per cent discount is also available if the property has been held for at least 12 months.
Sydney has one of the most dynamic property markets in Australia. With very high rental yields and low vacancy rates, the city is an attractive destination for investment property. Well before inspecting properties and connecting with an agent or conveyancer, investors seeking to buy property in Sydney will want to know about some of the top performing suburbs in the city. In this article, we take a closer look at some of the top performers in the past year.
Low Vacancy Rates
Figures released by the Real Estate Institute of NSW (‘REINSW’) suggested that rental vacancy in Sydney remains very low and unchanged at 1.4 per cent, the same rate as the September period. The REINSW’s figures suggested that the middle and outer suburbs have seen a small reduction in vacancy rates while vacancy rates in the inner city suburbs have tightened slightly.
Suburbs to Watch
Since September 2007, Australians have been able to borrow to buy property (or other assets) through a self-managed superannuation fund (‘SMSF’). The significant tax and asset protection advantages have made SMSF property purchases a highly regarded method for investment and retirement planning. In this article, we look at how to buy property with an SMSF, the key advantages of doing so, and some of the major SMSF rules to be aware of.
How is Property Purchased Through an SMSF?
The SMSF chooses the property to be purchased, obtains a loan approval (where applicable), and finalises their purchase through their conveyancer as they would with a purchase by a natural person. However, the purchase needs to be in the name of the property trustee as the property is held in trust for the SMSF by the trustee.
When it comes to property purchases, there is no single perfect structure for any situation. Your choice of purchase structure should depend on your personal circumstances and financial goals, and advisers such as a financial adviser, accountant, or conveyancer can assist with providing useful advice on your purchase structure.
Why Structure Your Property Purchase?
A property purchase structure is to be differentiated from ownership structure. The latter usually refers to owning land as a sole tenant, tenants in common, or as joint tenants. The former is concerned with the actual purchase structure and using different legal entities to buy property.
Different property purchase structures can yield specific advantages to the buyer. For example, a company structure may offer asset protection while buying property as an individual reduces costs of compliance. Your accountant and conveyancing professional can assist with specific advice about the benefits of different structures…
Changes to the First Home Plus Scheme (‘FHPS’) are due to take effect from 2012, with the FHPS to be replaced by the First Home – New Home Scheme (‘FHNHS’). Although your conveyancer can provide you with useful information about the changes to the scheme, we take a quick look at the changes and how they will affect home buyers in this article.
What’s the First Home Plus Scheme?
While the FHOGS provides a direct grant that in effect subsidises the cost of purchasing a home, the FHPS was established to provide exemptions or concessions on transfer duty (stamp duty) to first time home buyers. Along with residential dwellings, buyers who purchase land on which to build their first home can also claim under the FHPS.
Under the existing FHPS, which is in effect up until December 31, 2011:
Strata schemes, also known as body corporates, are very common in Australia. If you’re buying into a strata scheme, this article outlines four useful strategies to keep in mind. Your conveyancer can also provide you with advice as is appropriate for your case.
What’s a Strata Scheme?
A strata scheme is any building or a group of buildings in which individual owners hold title over small portions of the property (a lot) and all the individual owners also share ownership over common property. For example, the owner of an apartment owns the apartment but also shares ownership over common areas such as communal tennis courts, swimming pools, corridors, and other shared spaces.
Since buying into a strata scheme involves shared ownership and enjoyment of shared spaces, it’s quite different from buying other types of residential properties. It’s important for intending purchasers to be aware of their rights, responsibilities, and obligations before they buy.
What to Do When Buying into a Strata Scheme
The pre-settlement inspection is also known as a final inspection. In this article, we look at the key elements in a pre-settlement inspection and provide some useful tips for making a thorough inspection. If you have any doubts, consult a conveyancing professional for advice.
What’s a Pre-Settlement Inspection?
Buyers of properties have a right to a final or pre-settlement inspection of the property before they make full payment and take ownership. Your representative or conveyancer will usually advise that you undertake the inspection on the day of settlement (e.g, on the morning of settlement).
This final inspection is designed to ensure that the property is in the condition that has been contracted for. The buyer can check that all the inclusions are present and/or that no damage to the property has occurred since the pre-purchase inspections.
Buying at auction is a very popular way to purchase property, with hundreds and even thousands of properties selling at auction around Australia every week. Where the buyer is well prepared, participating at an auction can help you secure the property of your dreams.This article is designed to guide prospective buyers through the major steps in the auction process, though a conveyancer can be consulted if you have any specific questions.
The Reserve Price
The seller will nominate a reserve price. The reserve price is usually not publicised to buyers as it is the minimum price that the seller will accept for their property. If the highest bid on auction day does not match or exceed the reserve price, the property will be ‘passed in’. When that happens, the seller may put the property back on the market or try and negotiate an agreeable price with bidders.
Check the Sales Contract