What Is Negative Gearing? (And 5 Other Property Investment FAQs)
Many prospective property investors just like you have approached our Williams Landing real estate agents for property management advice. Over the years as a trusted real estate firm, we’ve noticed a pattern in the questions property investors ask us. In today’s blog, we’ve compiled a list of the most commonly asked property investment questions, and our expert advice on how to move forward in your property journey.
Why should I invest in property above other options?
There are many good reasons why you should invest in property, including:
- Property is a necessary part of life for most people. Hence, it is an asset that’s always in demand, meaning that with time, property investments tend to grow in value.
- It generates consistent cash flow. You’ll receive a constant stream of weekly, fortnightly or monthly income, which you can use to help pay off the investment.
- Property is tangible and this can help you feel in control of what happens. As an investment property owner, you can set the rent and tenancy agreements, manage the property yourself or outsource it to a trusted property manager, and check up on it whenever you like. For many people, this is what makes property a stable and safe investment.
What do I need to get started with my investment loan?
First off, you need a deposit. This is not unlike a deposit you’d collect when buying a home you plan to live in – you still need to account for stamp duty and other associated fees.
The main difference between an investment loan and a loan for a property you’ll live in is the interest rate. You may find that some lenders will charge a higher interest rate on investment loans, as they may perceive them to be riskier. Although you may not always face higher interest rates on your investment loans, it pays to be prepared in case you are.
It’s important to note that borrowing to invest doesn’t work for everyone, either.
How much rent can I receive from my property?
This will depend on the current rate at which similar properties in your area are being rented for. This is known as the ‘market rent’ rate. With all the online resources available to property owners these days, it’s actually quite easy to find out the market rent rate in your area. Simply research similar properties and pay attention to how long properties stay on the market at the current requested prices.
If you still aren’t sure how much rent your property will be able to collect, a Red23 property manager will be able to help you find out.
Can I increase the rent during the lease period?
You’ll need to speak to a professional property manager regarding relevant legislation for your state or territory, but generally, you cannot increase rent during the lease period. The best time to review your rent and negotiate new rent rate is when the lease has expired or is approaching its expiry.
What should I avoid when looking for an investment property?
Location is everything – it’s true! When you’re looking for an investment property, you absolutely must pay attention to its location. After all, this is the one aspect of the property you will not be able to change once you’ve bought it.
You should avoid:
- Buying in an area that is almost totally dominated by other investors. Instead, there should be a healthy mix of investors and owner-occupiers.
- Buying a property that is close to factories, busy roads and power line transmission towers, as these can be off-putting to potential renters.
- Buying in an area that doesn’t seem to have any potential for economic growth.
What is negative gearing in property?
Negative gearing refers to the situation in which you have borrowed money to invest in a property, and the income generated by this investment is less than the expenses it incurs. In short, this means you are making a loss on your investment and as a result, your taxable income will be reduced, meaning you will not have to pay as much tax. This strategy doesn’t work for every property investor, however, and in some cases it’s better to choose a positively geared investment in order to maximise your return.
Interested in Williams Landing real estate?
Red23 Real Estate is dedicated to helping you on your property journey. Whether you are a seasoned property investor or a first-home buyer, our Williams Landing real estate agents will give you expert guidance. We are a leading real estate firm in Melbourne’s West, supporting property buyers and sellers in Williams Landing and its surrounds. Experienced property managers are also a part of our real estate team.
If you’d like to know more about property investment or Williams Landing real estate, don’t hesitate to get in touch with us on 03 8372 2122 today.