Before you do anything else, it is vital to see an accountant and make sure you have worked out the right investment structure for your property investment and investment property loans. This doesn’t mean complicated financial engineering, it means understanding the basics like how to split debt between your home and your investment property, and how to divide ownership between yourself and any investment partners you may have, including your spouse.
It may seem boring or even a needless expense, but nothing will cripple an investment from day one like starting out with a structure that is badly arranged so you end up missing out on tax advantages you would have been entitled to.
This goes without saying, but the location of the property and the price you pay will make a big difference to your investment property returns. Choose a place that is popular with renters and primed for capital growth, and set a firm limit on what you’ll pay and stick to it. When you find a property you are interested in, you can use one of our free property reports to find out more about it and get an idea of fair property value.
Once you have acquired a rental property you can start working to increase the rental income you receive from the property. It is important to:
Many landlords refuse to allow pets which means that pet owners are often willing to pay a higher price for the limited number of properties that do allow their furry friends. Pet owners can be great tenants and allowing pets can give your property a real point of difference, making it lease faster and achieve higher rents.
The art of setting rents is to raise them periodically without driving out your tenants and suffering vacancy. This involves understanding exactly what is available nearby and the cost and hassle of moving for the tenant. If you study the market closely, you can ensure you are extracting the maximum price for your property without increasing vacancy.
Lenders often change their investment property interest rates so you should keep an eye out and benchmark your loan to market from time to time to see if there’s a better deal available. A seemingly small difference in interest rate can add up to a lot over time.
For instance, on a 30-year property investment loan of $450,000, if you find an interest rate just 20 basis points cheaper, it will save you $18,441 in interest over the life of the loan. To see how much you can save on your loan with a cheaper interest rate, use our free mortgage calculator.
As you can see, small changes can make a big difference in how much your property earns. Take the simple steps above, and you will be well on your way to maximising returns from your investment property.