Smart property investment: a guide

Investing in property can be straightforward if you follow a few simple principles. Although buying an investment property is similar to purchasing a home to live in, it is essential to approach the decision with a strictly business mindset. "Smart property investment" means focusing solely on the bottom line and removing all emotion from the equation.

Know the essential investment principles

The key to successful property investment is a steady rental income and strong capital growth. Investing in an affordable, attractive, and well-located property can help to safeguard your finances for the long term. As tenants increasingly seek a certain lifestyle, it makes sense to choose a property that is close to amenities such as public transport, shops, restaurants, parklands, and schools. Additionally, it’s important to consider depreciation and reduced stamp duty when deciding to invest in new dwellings or off-the-plan developments.

Define your desired outcome

To establish a clear investment strategy, it’s crucial to determine your primary property financial goal. Do you want a self-servicing investment property that provides sufficiently high rental returns, or are you chasing capital growth? Negative gearing can help reduce your tax burden when rental returns do not cover the interest on the borrowed money or the expenses involved in retaining the property. This loss can be used as a tax deduction and varies according to your tax bracket. However, it’s important to be prepared for the potential adverse effects of interest rate rises or a prolonged period without a tenant.

Take the best approach to achieve your desired outcome

To ensure a successful and "smart property investment", it is important to take a methodical approach. Choosing the right investment strategy will dictate the type of property and location you should be looking for. As with any investment, higher returns come with higher risks. Therefore, thorough research, planning, and attention to detail in each step of the buying process will help minimise risk and stress. Seeking advice from industry professionals may also be necessary, but the benefits of peace of mind make it a small price to pay.

Like a fine wine, an investment property requires nurturing and time to mature to reap the rewards. By following these simple rules, you increase your chances of investing wisely. It’s always advisable to consult your home lender, financial advisor, or bank for further investment advice.