- Access bond: Apply for an access facility to withdraw extra funds paid into your home loan bond.
- Annual rental increases: Ensure they keep pace with inflation while also being aware of the risks of both bad and good tenants.
- Bond originator: Use a bond originator to find favourable home loan terms. Better bond is an option I used for clients when I was a real estate agent.
- Commission: The seller pays the estate agent's commission, typically 6 - 10% but this is mostly negotiated between the real estate agent and buyer.
- Capital gains tax: CGT may apply if the rental property is a second property.
- Diversification: A single rental property is a concentrated asset, consider spreading risk by investing in other assets or structures as well.
- Forced sale: Fixed property is an illiquid investment compared to investing in the stock market, be aware of the potential price drops in forced sale.
- Gearing: Borrow money from a bank to fund an investment property purchase, generating wealth over time.
- Home loan: Negotiate favourable terms and improve your credit score for better interest rates.
- Insurance: Include insurance costs in your budget, the bank may require bond and building/contents coverage.
- Interest rates: Fluctuations can affect bond repayments and net profits.
- Joint ownership: Put legal agreements in place to protect interests.
- Landlord duties: Have specified duties in the rental agreement.
- Maintenance: Budget 0.5-1.0% of the property's value per year for maintenance.
- Net rental income: Calculate real return to determine profitability.
In conclusion, investing in buy-to-let property can be a lucrative venture, but it requires a great deal of thought and consideration. By taking into account the key points discussed in this article, you can make an informed decision and minimize your risk in the rental property market. Remember, careful planning and research are crucial to success in this industry, so take your time and do it right. Happy investing!
