Choose investment property with subjective preference
About the choice of investment property, what needs to emphasize is that it is different from the choice standard of self-housing! Investors often complain that the balcony of an investment house is too small, toilet does not have windows, the house has carpet not the floor tiles, the housing appearance is not novel, why the house does not toward the north and south and so on, but actually for real estate investment, the house itself is only a product, a medium, a tool to help investors get investment income.
If you think of a house as a stock or a bond, do you think about whether you like that stock or not? The only thing to consider is the return on investment! And how to get the most returns with the least amount of money. In other words, it is the potential appreciation of the property, rental returns, long-term holding costs, and your cash flow.
The land complex
Many people struggle with the issue of land, but the fact that whether or not there is a "land" should not be the only consideration! In fact, one word is all you need to think about, “location”.
Ask, there is an apartment next to the Sydney Opera House or any house in remote areas, if the price is the same, so from the perspective of investment, which do you think has more potential appreciation? Which will be more in demand in the future?
The advantage of villa is to include land ownership, the disadvantages are that the early investment is big, it is inconvenient to maintain the house and the long-term holding cost is more expensive than that of an apartment. Compared with the villa having a great deal of upfront costs, buildings under construction (refer to the new houses on advance sale and the settlement time ranges from 1 to 2 years) will give investors less money pressure, sometimes, the money of a set of villa can diversify almost two or more of the apartment, investment can give investors more flexibility to operate their own investment projects, making the maximum benefit and minimizing the risk of funds.
Whether the housing price will increase or not
This is probably the most common question, I want to ask whether the rent will rise or not, whether wages will rise or not, whether water and electricity bills will rise or not, whether other object prices will rise or not and whether or not there is an inflation? If all these are going to go up, then how can housing prices not go up? House prices are really just a combination of all of these things. At present, in Australia, inflation alone is about 4 percent every year. If the economic situation is good, the investment house is in a good location with various potential factors of appreciation, then it can be doubled or even more than doubled in 7 to 10 years. Therefore, do you think the housing price will go up?
"Bottom" mentality
Almost every investor wants to buy at the bottom price and sell at the top price. But where is the lowest point? I believe the most professional and outstanding investment expert also cannot answer this problem. It is only when house prices recover that we look back and say: oh! The last time when I wanted to buy but did not buy was at the lowest point! Buying at low price and selling at high price is every investor's dream, but Buffett also said, copying the bottom is a god to do, not a person to do. Investors should prioritize value over price.
Then we have combed out several most main investment erroneous zones for everybody. And we will show you the differences between the investment of new homes and second-hand housing. A lot of people like to invest secondhand houses, and they think that the old house is cheap and the first investment is small, so they feel that the risk is also small. However, the risks are always out of sight. Purely from the view of investment, new homes will be able to maximize the benefits of investment rather than second-hand housing. Due to the limited number of words, I will show you a few main aspects.
Value appreciation
Two properties have extremely similar aspects of body corporate, such as the orientation, floor area, but if the old houses and new houses are different, the appreciation of the new house will always be much higher than that of the old house.
New building materials and design concepts will also make new homes more affordable, especially when banks estimate the value of them.
If you want to use real estate appreciation to make a second loan, the bank will value the new house much higher than the second-hand house (meaning you can lend more cash at a time), even after a few years of the settlement, the significant advantages of the new house is reflected. At present, in order to catch up with the rapid growth of population, several big cities in Australia are building everywhere to solve the housing shortage crisis.
The flood of new homes being built in each district each year makes it harder for older properties to sell, or to keep prices down.
Rents
Rent is the most effective tool to reduce the long-term holding cost of a property. In Australia, the rent difference between a new house and a second-hand house in the same area is sometimes more than 30%, because not only tenants generally prefer to choose a new house, but also the design concept and pattern of the new house are more modern and humanized. For instance, the proportion of sitting room and bedroom, daylighting, study design and so on. Then the high rental return and easy to rent can bring the further security for your cash flow.
Holding costs
Under the premise of similar facilities (all have/have no swimming pool, gym, etc.), the second-hand house has a higher holding cost than the new house.
Generally, the second-hand house is more likely to be damaged in the building structure, water pipes and walls than the new house, and all the costs of damage and maintenance are paid by the owners themselves, and the property management fee of each quarter will rise sharply due to the old and damaged property.
These hidden fees allow owners to unknowingly raise their holding costs substantially. Some investors buy second - hand housing for the cheap prices, but once the building maintenance problems appear, it is really too late to repent.
For the new house, although at the beginning the body corporate fee is slightly higher than that of the old, it can remain unchanged for a long time, and the old house may suddenly need a large amount of money to renovate equipment, which we hope investors must take into account.
In addition, the new house in energy conservation, environmental protection, heat insulation, waterproof and other aspects also has greater advantages, and has lower expenditure.
Tax
At present, the Australian government's tax refund policies on investment houses are all in favor of new houses. For those who have income in Australia, the tax refunded on investment properties of new houses every year can be several times of that of old houses.
In Australia, taxpayers who buy investment houses can enjoy negative tax deduction, which is a way to allow individuals to reduce their taxable income in the Australian tax system.
With negative gearing, investors can save a lot of money each year in taxes. To be specific, the source of negative deduction for investment housing is depreciation. Depreciation means that the "loss" of the house caused by the use of tenants when you rent out a house. Australian tax bureau allows these "loss" into your annual expenditure, so you need to pay less tax, and the depreciation rate of new home is greater than that of the second-hand housing. The real estate depreciation rate generally ranges from 1.5% to 4%, depending on the situation of each property.