Driven by the needs of our customers, agents and investment property specialists, we provide a professional environment and innovative real estate products and services to our customers, clients and agents.
With representation throughout NSW, our agents aim to compliment their existing professional services with selected quality investment property from all over Australia. Giving an exposure to many different real estate markets to best suit the investor. Together with The Property Watch agent, the investor can build on the individual investors financial background and trust already established, and supported by in depth market research on individual investment real estate properties and the property investor toolkit, The Property Watch offers a truely unique and investor driven approach to real estate investing.
We know that when you make a move with a new real estate purchase , every detail is important. On behalf of The Property Watch, we welcome you to our firm and look forward to serving you.
Check the Figures Before Buying an Investment Real Estate Property
We talk about checking the figures before buying an investment real estate property, but before doing that we need to discover what the figures are and how do you get accurate figures. Checking the wrong figures can make the difference of making $200 or losing $1,500 per month. Here we will go through the costs and factors to consider to make your investments successful.
INSURANCE COST
Insurance on investment real estate properties are typically higher than owner occupied properties. So get an insurance quote on the property instead of basing your expected insurance off of the insurance bill for your house. You also should purchase liability insurance which can be expensive.RATES AND TAXES
People frequently use the taxes from the year when they purchased the real estate property, assuming the taxes will stay the same. Taxes cange every year. Taxes can go up drastically after a purchase. For example, an owner occupied real estate property usually has tax breaks, so unless you intend to owner occupy too, your taxes will go up.
Also, the council valuations that your taxes are based on could go up after your purchase. For example, if you buy a real estate property for 150,000 but the land tax valuation last year was for 50,000, don't count on it remaining at 50,000. In fact, I have seen cases where a year after a property was purchased the tax assessor increased the appraisal value to the purchase price. The safest approach is to look at the tax rate and the purchase price to determine your future taxes.
INTEREST ON THE LOAN
A huge cost is mortgage interest. You should definitely sort out the details of your loan options and get an idea of current rates before running the numbers. It could make or break a deal. If you are getting a duplex or a house, the loans are generally similar to other home loan options. One thing to consider is to put more down because the more you put down, the less your loan will be, which means less monthly interest to pay. Another consideration is the type of loan, fixed or variable.
PROPERTY MANAGEMENT COSTS
If you are going to hire a property management company, definitely get their rates.
VACANCY COST
For some reason people tend to forget to take into account vacancy rate. Even when looking to invest in a desirable rental area, it's best to always take into account at least an 8-10% vacancy rate. Do some investigation, look at your market and find statistics on the average vacancy rate.
TENANT TURNOVER COST
Most investors have personally found the biggest surprise to be the expense of tenant turnover. This includes advertising for a new tenant, cleaning, repainting, replacing carpet, etc. If you expect to have high tenant turnover, like next to a college campus, anticipate this to be a significant cost.
STRATA AND REPAIRS
This is by far the most difficult number to estimate. It depends on the real estate property, whether you fix some of the problems yourself or hire outside help, and random luck. So we can't give you a hard and fast number but we can look into different factors to take into account.
**Property Type - When you evaluate different properties remember to take into account the type of real estate property. If it's brick you won't have to paint or worry about wood root. Decks need constant maintenance. A property with wood or concrete floors will be easier to clean and will not have to be replaced when a tenant moves out. Just think about the aspects of the property and their maintenance costs.
**Property Size - A smaller property is easier to maintain than a larger real estate property. For instance, say there are two properties for sale for 200,000 and each have a combined rent of 2000. A property with 2 units and a total of 1000 square feet will be cheaper to maintain than a property with 6 units and 3000 square feet. The larger property will be more expensive to maintain when you are replacing the larger roof, painting the interior walls, etc. Also, more units mean more money spent on advertising, make-readies, and more appliances to repair.
**Property Location - Consider your proximity to the real estate property. If you buy a real estate property 30 miles away, over the course of a year you can spend a decent amount of gas money driving back and forth.AMOUNT OF RENT
Rental income is not as straight-forward as it seems. Sometimes properties are under-rented and sometimes properties are over-rented, so be sure to find out the market rents when you consider a property. One investment we looked at comparable leases and realized the rents were too high, so instead of assuming we would continue to receive $3,600 of rental income, we had to be realistic and assume it was more like $3,200.
WATER, GAS, ELECTRICITY, COUNCIL RATES ...
Be sure to check what the tenants pay for and what the owner pays for. This includes all the utilities and lawn maintenance. In addition, there may be owner expenses like parking lot lights and trash bin service.
SUMMING THE NUMBERS
Once you add all the numbers up, you often find the property has zero cash flow or even negative cash flow. This doesn't necessarily mean you should not purchase the property. There are positive tax benefits to rental properties and depending on your situation, a property with technically zero cash flow could still put more money in your pocket due to tax benefits. Also, if you think the property is going to appreciate in the future, a zero or negative cash flow property could still be appealing.
The point here is that if you are buying a property with zero or negative cash flow, it's best to know beforehand instead of after the property purchase.