Burnout isn’t fun. It’s a result of investing in everything except yourself. As a property investor, you must be on the top of your game if you want to grow your portfolio and increase chances of financial freedom. Not all of these tips are based on financial success. They’re about investing in yourself and your worth.
The property investor community is full of people boasting about their annual return, how they got a discount on their capital gains tax, adding a family home (not an apartment) to their portfolio, etc.
No two investors are the same, so stop comparing yourself to that person in your head right now. Their strategy works for them and your strategy works for you. A self-described guru might be up until early hours looking at deals. You prefer 8 hours of solid shut-eye and check your emails for alerts the next morning. And that’s okay.
Talk to a professional
Asking for help isn’t a sign of weakness. Confronting problems head-on and admitting what they are is strength itself. People don’t know who to turn to sometimes, especially when it comes to their ‘failures’. Go to your GP for a referral to a psychologist and book an appointment. Mental health is just as vital as physical well-being. That brings us to the next point.
Take a day
Is your property investor role more of a side hustle? A majority of people in the game work full or part-time jobs and devote a small amount of time to the real estate market. Juggling two roles will lead to burnout and that’s why it’s important to take a day off. Don’t be a hero, it’ll result in a meltdown.
Do things that make you smile
You enjoy being a real estate aficionado but it’s a business, not a hobby. What would you say you don’t have time for anymore? Take an hour, half an hour, out of your day and do something that fills up your soul. Exercise, art, reading, swimming, baking are some suggestions to get you started.
Distance yourself emotionally
Emotionally investing in real estate is a recipe for disaster. That’s stress you don’t need in your life on top of work and family.
Detachment and being brutal in your choices will feel uncomfortable at first. But those tenants who keep disrespecting your investment home, for example, aren’t your family. The property manager dragging their feet and not returning your calls isn’t your best friend. Evict, cut the cord, and look for what serves you better. You’re a property investor, a businessperson. And people in business are successful because they make uncomfortable choices.
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Your rental property won’t earn you income straight away, but there’s ways to get to that point a bit faster.
80% of property investors are unaware of the tax benefits they can claim through depreciation. Imagine getting back thousands of dollars every year, on top of your (still meagre) rental income. The value of what you purchased this year won’t have the same value ten years from now.
Book an inspection as soon as you settle the property. The quantity surveyor will write up the report and send it back to you a month after their inspection. Get it to your accountant as soon as possible after that so it’s on hand in time for your annual return.
Increase the rent
As the area’s profile grows, so will demand and rental prices. It’s not unreasonable to change the rent a little. 2 – 3% is enough annually. Link it with new amenities like appliances or a paint job to show the tenants that it’s worth the increase.
Charge for amenities
‘Little luxuries’ can also boost the cash flow for your rental property. Cleaning services, internet connection/wifi, gardening, Foxtel and the like are all extras that can earn you a couple of extra hundred dollars.
Charge for the parking space
Same as renting out the apartment, rent out space in the parking garage (if your property is part of a complex). Inner-city parking is especially coveted. If there’s no parking on-site, look a one of the links below to investigate the possibilities of leasing a space.
Tenants are picky and they’ll choose properties that suit their needs. They’re busy people with kids, pets, and full-time jobs. Their home should be a place to relax and let the dog off the leash. Here’s some of the items on their list;
Location: tenants want a rental property close to work, school and the shops. Public transport right on the doorstep and lifestyle in the neighbourhood is a plus.
Housekeeping: A dishwasher, laundry area with at least a washing machine and a fully equipped kitchen is a big one. Bonus points if the appliances in the rental property are stainless steel!
Nature: Natural light, balconies, and yard areas for pets are also on the list. You might be hesitant to lease to tenants with pets, but more and more people are adding furry friends to their family.
The list goes on, but upgrading the appliances and raising the rent to cover the garden/maintenance fees is a place to start!
Read this before using your investment property as an Airbnb
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Leasing your investment property on Airbnb is a risk. You dream about earning extra income, and it’s wise to find a few extra streams to boost your bank balance. But is it worth the extra work we’re about to remind you of below?
Rules and regulations
And there’s a lot of them. There’s zoning laws, tax income laws (it must be declared; but this is often ignored) and local council approvals to look at. As written by Cortado Lawyers;
An Airbnb host will need Local Council approval (and a licence) as Bed and Breakfast accommodation (B&B) if they provide on a commercial basis: (a) rooms for overnight accommodation; and (b) at least breakfast or common cooking facilities; and (c) more than two or three double rooms for rent (which accommodate more than 6 people). A manager will usually reside in the property. The precise requirements vary between Local Councils.
AirBnB has also partially answered the question;
…please review your local laws before listing your space on Airbnb. More information about your city’s laws and regulations may be available on our Responsible Hosting page in the Your City’s Regulations section.
By accepting our Terms of Service and activating a listing, you certify that you will follow your local laws and regulations.
Costs over income
Cleaning fees, gardening, maintenance, and even insurance are only some of the costs you must consider. The latter is especially painful for landlords whose tenants are illegally subletting. Any insurance on the investment property and the tenants living there is made void.
You can charge more ‘rent’ because the cleaning fees are included in the final cost per night. You can also raise the rent as you like when it’s peak season because people will be looking for an alternative to hotels. But don’t expect your investment property to magically attract income within a week of putting it up. Short term rentals equal higher maintenance costs, on top of AirBnB taking their fee.
With regular tenants, you have guaranteed income for the duration of their lease. They could be in your rental property for years.
AirBnB, like hotels, is more seasonal. Holidays, festivals, and other events affect vacancy rates. Can you afford your investment property being empty for weeks at a time?
You’ll pay more than you make if you don’t play smart
Investors leave most of the care duties to their property managers; collecting rent, organising maintenance, and evicting troublesome tenants. But when you own the property, you become your own agent. Hosts with great reviews get more bookings, so you must be prepared to act as a concierge if necessary.
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There’s two main strategies in the investment game: yield vs capital growth. They’re different, but the goal is the same: to make the investor money.
What is yield?
This is complicated for the new players in the investment game. Agents will speak about ‘yield’, the percentage of an asset’s market value. There’s gross yield (before expenses) and net yield (after expenses are deducted). Your Investment Property gives us the formula below:
Weekly rent x 52 / (value) x 100
The result is your annual return, or yield, of that property.
What is capital growth?
One common strategy in property is to buy the house, hold it as an investment for a period of time and then sell it for a higher price. The surplus is called ‘capital growth’. But this strategy isn’t for those looking to ‘get rich quick’. Capital growth occurs over a decade or more. In this time the area demographic changes thanks to developments. This includes land/apartment buildings, schools, and public transport.
As always, with whatever strategy you choose, make sure you listen to your advisors (accountant, property manager etc). They’re the experts for a reason.
Do your research
If you want capital growth, you might choose to buy in a satellite city or an up-and-coming suburb. Research trends in the areas you want to buy. These include:
Retail outlets (cafes and boutiques)
Are there cafe’s in the area you’re house-hunting? What will appeal to potiential tenants?
Positive gearing happens when you receive income from your tenants after paying maintenance fees. This type of investment gives you cash flow but the disadvantage is paying tax and a slow rate of capital growth.
But some investors will snap up positively geared properties to yield the benefits of the income. Because they’re earning money, it makes them more attractive to lenders. They have the potential to buy another home and grow their portfolio in a shorter period of time.
Plug the gaps
After you’ve done your research you’ll know that there’s rules and regulations that other landlords are imposing on tenants. What can you do differently? Your Investment Property did a survey asking tenants what they look for and the results show that:
38% of tenants look for parking
31% want cable internet connections
32% look for pet-friendly properties (dogs are family too!)
25% want a strong mobile connection
22% check for an abundance of powerpoints
So after reading this, what would you do to build a strategy to yield the most from your portfolio? If you want more advice, read these articles:
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Confused about depreciation rules for your rental property? Did you even know there were rules in the first place? Depreciation, tax and claims processes are large and confusing mazes, so we gathered articles from around the web that make things crystal clear.
Investors who hold both commercial and residential properties were thrown for a loop in May 2017. Starting from July, the beginning of the new financial year, the Federal Budget came into effect with new depreciation rules. These rules affect what owners can claim which in turn claims how much they get back over time.
Investopedia is a useful website both novices and experts can refer to. The page linked above goes into the basics of depreciation such as how it’s calculated and when it ‘begins’. Hint: it’s not actually after the settlement date.
Make sure you’re square before the tenants move in
Rental property owners must navigate complicated tax rules. Not navigating them correctly leads to costly penalties. To help the common Australian investor, the ATO made a top 10 list of tax mistakes to avoid. These include what type of expenses to claim, as well as the right portion of costs and how to keep the right records.
If you need a printout to have on your nightstand, there’s a PDF available to download.
This page is a one-stop-shop for investors wanting to know more about the process. There’s an uncomplicated list of depreciation rules, definitions and examples of what assets you can claim.
The page also describes the methods used to calculate depreciation costs, prime cost vs. diminishing value. But the quantity surveyor handles these calculations, not the investor. Once the values are worked out they go into the depreciation report. This crucial investment tool is recommended at the end of the page as the final step of claiming depreciation on an investment property.
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Being selective about what you invest in, whether it’s commercial or residential properties, is a blessing. You invest wisely and earn enough to make your next purchase. When you’re shopping around, you already know the type of tenant you want to target.
University and international students either live on-campus or in suburban properties close to their school. Residential properties like this need to be monitored closely so that nobody skips rent or causes damage. But in spite of the horror stories, the tenants are normally very well behaved.
You can rent out your properties as student accomodation
Student accommodation can take many forms. It can be a block of units, a single family home or even a townhouse. The home is ideal if it’s close to any given university or college campus and public transport.
These residential properties are often built by specialists and handled by a company with specialist experience (Aveo is an example). But on Real Estate, there’s some properties marketed as ‘retirement living’, geared towards investors.
Retirement homes are marketed to those who are over sixty but are by no means invalid. Residential properties on the market have high-end amenities and appliances included in the apartment or home. ‘Old’ doesn’t equal ‘dated’.
Mansion on the outside, retirement living inside
Retirees are good tenants because they respect their home and maintain it to the best of their ability. If they can’t, they’ll have a nurse or family member help them. If you’re looking at residential properties for retirees, it’s worth looking into these medical/nursing services and market them as optional amenities.
Single family homes
Small families will rent before they can afford their first home. Single family dwellings that are close to schools and shops are absolutely worth the investment and the fight that comes with trying to purchase one. Competition is fierce because other investors know there’s money to be made in this area of the market.
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You’re serious about getting into the investment game even though you don’t have a home in your own name. Fortunately, this isn’t an obstacle. Investing in property whilst renting at the same time, or ‘rentvesting’, made a splash early last year. It’s still going strong, despite getting less coverage in the headlines.
Why is rentvesting so popular?
There’s a number of things that make renting a more viable option among investors and people house-hunting in general.
Freedom: The word ‘mortgage’ scares the skin off lots of people and they can’t face the idea of juggling multiple home loans at once. It’s easier to sink their money and effort into their investment. Investors can give their full attention to the investment properties they own, like organising renovations, speaking with property managers, and organising depreciation inspections.
Postcode envy: So you can’t afford to own a home in that ‘happening’ and ‘ritzy’ suburb. But there’s enough in your budget to rent. You can rent where you want to live and then buy property in outlying suburbs. You can rent that fancy inner-city apartment but rent out a three-bedroom house to a family a few suburbs over.
Affording to live in the CBD area is enviable
Money: Investors who live in a rental home don’t have double the amount of taxes and duties that come with owning an investment property and their own home. And there’s plenty of benefits that come with renting out a property for investment purposes. Tax deductions cover real estate advertising, some legal costs, and general maintenance. The amount of money earned back in tax depreciation will increase the longer the investor owns a property.
As a rentvestor you have more financial freedom
Rentvesting is a way for first-time investors to get on that first rung of the property ladder. Prices are increasing on the market but living the rental life has eliminated this affordability problem for some. Those who rentvest get the freedom, the bragging rights, and the money back that other property owners miss out on.
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It’s a simple statement; young people simply can’t afford to buy a house in today’s market. Or can they? There’s a lot of layers to this statement made up of economics, investing habits and the trends of of the housing market. We’ve gathered articles from around the web to delve further into the issue. Can young people really not afford the Australian Dream? Or is it just more fake news?
They’re either lazy or savvy. Both adjectives are great headline fodder, but few are taking notice that Millennials are driving change in the property market. The differences are obvious, from how young people save right up to how they buy.
This is a good article for younger people wanting to know how to even get started in the property market. Homes and ‘abandoned shacks’ in Sydney are selling for millions, intimidating the next generation out of the game. But it doesn’t have to be that way if you play smart.
Compromise isn’t a word people like to hear when they really want something. It’s necessary though, if the younger generation wants to enter the property market. Buying in a capital city mightn’t be an option,
The younger generation still desire to own a property. Surveys done have placed this goal above a successful career or having a family. The desires are the same but the gap on how fast it can be achieved has widened substantially, as reported by The Telegraph.
The great debate: 5 articles about smashed avo vs property investment
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Commercial property is a lucrative investment if you have the right tenant. Early on in your property investment planning, you should’ve given thought to who you want in your space. If you’re just starting out, this can act as a handy reference.
Coworking space agency
There’s more gig-workers, digital nomads, and freelancers than ever before. They all need a space to work, so why not make yours the best place?
Normally they won’t lease the space through you. This is done by the coworking space agency renting the building. If you’re creating a commercial property from the ground up, make sure your design includes a combination of areas than can be used as board rooms alongside open-plan working spaces.
When you’re shopping around for a new property, location is the biggest factor. You’re more likely to get a tenant like this if you purchase an inner-city location, close to public transport. New laws mean you can only depreciate the plant & equipment you install yourself. If the commercial property needs some ‘fixing’, like new taps and lights, you can deduct these without any trouble.
This tenant is always going to return a good rental profit when they find the right location. Restaurants, bakeries, and cafes are everywhere, both in CBD and suburban areas.
Cafe’s where people can work or relax with a coffee and croissant are always welcome
A commercial property like this will need up-to-date plant and equipment. You can install these yourself and claim the deductions over time. This includes ovens, stoves, refrigeration, and even the taps. If you’re lucky, a well-known cafe will need to open a second location and you’ll happen to have the perfect property ready to lease.
These ones are trickier to lease and it’s best left to your property manager. Their screening process ensures the potential tenant is suitable to lease the space.
Retail is very competitive and some small businesses do struggle. But those who thrive will either open a second location to keep up with demand, or shop around for a larger space.
A small or mid-tier media agency, like marketing, will definitely treat your commercial property with respect. It’s their ‘home’ and a place for them to host clients of their own. The property manager will interview them to make sure their level of income is suitable to keep up with the rent.
To attract a tenant like this, it’s good to keep the office space to bare basics. The tent will dress it up themselves. It’s also ideal to have a cordoned-off ‘boardroom’ space for private meetings.
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Are you holding out for a heritage home? Or would you rather build a house that pays homage to era’s past with heritage ‘features’? We’ve gathered articles around the web that compare the pros and cons of buying vs. building for investment purposes.
Banking, insurance, and investing are all part of CanStar’s services. It’s natural they’d write something about property investment and the associated costs. They look at both sides equally, listing the pros and cons of each. This is frustrating to those who want a simple ‘yes or no’ answer but their advice is not to be taken for granted
Domain interviewed several experts in the property field about this topic. A buyer’s agent, realtor, builder, and lecturer all have their say. Ultimately though? It depends on the investor and their priorities.
This article is written by Lindy Lear, a successful investor who built a portfolio of eight properties in three years. She takes readers through the process of building a home for investment purposes. This starts with choosing a property and ends with the amount of the (many) tax benefits the reader can claim if they follow through on their plans.
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