An industry expert has advised investors ofher golden rules they must follow.
This year will be 12 months of opportunity forsavvy property buyers, seasoned investors and clever newcomers, according toAnna Porter, the principal of Suburbanite, who is also a market commentator andvaluer.
Her rules include budgeting, buffering,diversifying and research.
“In 2023, you’ll want to budget ahead as thisis certainly not the year to fall victim to stretching yourself thin,” shesays.
“The changes to the interest rate environmenthave already made a dent in the budgets of households all over Australia. Setyour budget from the start and ensure you’re leaving enough room to be able tocounter any further rate rises or unexpected expenses.”
She also warns all investors that they need abuffer.
“When buying in unknown times, you’ll want abuffer especially as homeowners stretched for cash opt to sell their homesquickly,” she says.
As principal of Australia’s only nationalbuyers agent firm, Ms Porter emphasises now is the perfect opportunity to buyoutside of your own backyard.
“Diversification is key in 2023 and we knowalready there’s plenty of opportunity for investors if they know what to lookfor,” she says.
“This is the year to look outside of yourbackyard – you can still get a great investment property in South Australiawith less than $500,000.”
The window of opportunity is in the firstquarter of 2023 while the market is already softer, and before borrowing powerreduces further.
“Investors with under $500,000 should look toPerth and Adelaide, especially as their borrowing power diminishes,” Ms Portersays.
“With this kind of investment, you cantypically get an older house, under half an hour of the city or a townhouse orvilla in closer proximity to the CBD.”
No matter where you might be investing inAustralia, Ms Porter advises you need to know the numbers.
“It’s critical to do your homework especiallyon the vacancy rates,” she says.
“Speak to valuers and local agents to makesure the numbers stack up and cross reference this with your own research.”
A quality real estate agent is engaged intheir local market every day and knows not only what reasonable market valuesare, but how many interested buyers are in the market and who they are.
Property investment is also a long-termstrategy and the tax benefits provided by real estate deliver unmatchedfinancial help. Combine it with the long-term growth of real estate values,despite short-term dips, and real estate owners are winners.
Investors get a 50 per cent discount on capitalgains tax (CGT) if they hold an asset for more than a year.
CGT is not a specific tax rate but involvesadding the profit on an asset sale to a person’s taxable income for a financialyear.
Investors can also claim a tax deduction whentheir holding expenses exceed the income generated (usually rent), and propertyhas plenty of expenses including interest, council rates, insurance andproperty manager fees. A negatively-geared investor still loses money, buteventually income should rise above the expenses – which is called positive gearingand should be the goal.
There is another big tax deduction for realestate investors, and it costs them nothing from their own pocket.
Depreciation of items including curtains,carpets and appliances can be claimed when the item or property is new, whileinvestors can also claim capital works deductions, which are essentially thecost of the bricks and mortar.
The write-off rate for capital worksdeductions is typically 2.5 per cent a year. For a $300,000 building, thisequates to $7500 annually without stripping a dollar from investors’ hippockets.
In property, it often comes down to crunchingthe numbers and for people looking to get ahead, doing research is a key step. Oneof the best ways to keep on top of the game is with REA Group’s data andinsights tool, PropTrack, which has regular market reports and commentary tohelp advance the understanding of important trends and changes, and be aware ofconditions, policies and developments affecting property markets around thecountry.
