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13/10/2019 苏州美甲学校

Nicole Helps – Decide on an investment property

If a property remains empty or tenants don’t pay, your money would be better off in the bank. Photo: SuppliedHi Nicole, I’m looking to buy an investment property outright for under $250,000. It would be my first property purchase and as I do not currently work, I couldn’t obtain a mortgage to stretch the budget but am increasingly sick of low-yield term deposits. I am familiar with the property-buying process but know nothing of the rental process and what sort of contingency funds I should have set aside. In regards to type of property, I’m ruling almost nothing out but definitely will be buying near a train station and ideally with a parking space around the Melbourne suburbs. Would love your feedback on the decision itself and the process. – Anita, Melbourne

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Umm, that might prove tricky Anita. There’s not much around, even in the suburbs, for $250,000 any more. You’ll almost certainly be limiting yourself to an apartment, and remember there’s talk of an oversupply of apartments in Melbourne, which could affect both your investment value and potential rent.

You may have better luck in the regions – compare some median prices on Domain’s suburb profiler (owned by Fairfax Media).

In any case, the thing to remember is that property has the highest entry costs of any investment, so you want to be able to hold on to anything you buy for as long as possible (locking up your money).

In Victoria, stamp duty has just been abolished on first homes worth under $600,000. But not on first investments. (If you lived in it for a year, you could save more than $10,000.)

You’ll also accrue some legal/conveyancing and inspection fees from the transaction. A couple of thousand dollars or more, perhaps.

In terms of set-up and ongoing costs, there are rates, possibly water (although some tenants now pay this), potentially strata fees (check these before you buy), landlord’s insurance and maintenance and repair. If you decide to go with a rental management company rather than manage the property yourself, you’ll forego an average 6-8 per cent of the rent (and maybe a week or so rent extra if they need to replace a tenant).

You’ll need to keep aside a bit of money for this at the outset – principally for landlord’s insurance (which is building insurance plus specific cover for things like malicious damage by tenants) – and, vitally, maintain a cash stash for big repairs and bills (and hold back enough for the tax on your assessable income; get an accountant, tax deductible, to help claim all available depreciation).

Paying by cash, you do avoid the major risk factor for landlords: void periods without tenants – or money for the mortgage. Except of course, then your (depleted) funds will have been better off in the bank.

Nicole Pedersen-McKinnon is a money educator and consumer advocate: themoneymentorway苏州美甲学校. You can write to her for help solving your money problem, or with a consumer question, at [email protected]苏州美甲学校苏州美甲学校论坛.