Property investment Adelaide
Buying an investment property may be more feasible than you think. With your tenant covering most of the mortgage, owning a second property may be both affordable and profitable. And the best part? If you already own a home, you may be able to use the equity as a deposit on your investment property.
At Pisani Group, we understand the value of speaking with professionals. That’s why we work closely with Pisani Property Advisors. Owner and founder, Kristy Saunders, has 11 years of Real Estate experience and a passion for helping her clients succeed. With her extensive expertise and industry insight, we bring you this in-depth collaboration. Contact Kristy to find out how she can help you build a happy and prosperous future through property.
Are you ready to discover if you can afford that investment property? Read on to find out.
Questions to ask yourself first
It might be tempting to buy the first property that catches your eye, but now’s not the time to be impulsive. Take a moment to think about why you want an investment property and how it will affect your lifestyle. Start by asking yourself these questions first:
- Why do I want to buy an investment property? Is it to grow my personal wealth or to create a passive income for retirement?
- Will this help or stop me from achieving my long-time goals? For example, could an investment property help you buy a bigger home or help you save for a trip around the world?
- What type of investment property do I want? Something that brings in high rental returns, or one that you can sell at a profit in a few years?
- Would I be willing to renovate the property to add value? Or are you looking for a property that is ready to rent out now?
- Do I want a house or a unit/apartment? Units and apartments may be more affordable but are less likely to offer a high return on investment.
- What will the interest rate on my investment home loan be? Now’s the time to compare several home loan options so you can find the best deal for you.
How much deposit will I need?
In a perfect world, you would have a deposit of 20% or more of the final property price before you take the plunge and buy. And if you have another property, like the one you’re living in now, you can use the equity as a deposit.
However, with school fees, power bills, car maintenance, rent and mortgage payments, saving a 20% deposit could take years – which is why many mortgage lenders are becoming more flexible these days. The amount of deposit required will vary per lender, but many accept a deposit as little as 10% or 5%. Just keep in mind that you may be liable to pay Lenders Mortgage Insurance.
What’s your current cash flow?
Now take a look at your cash flow – what is your weekly/fortnightly/monthly money that goes in and out of your bank account? By studying your income and expenses, you’ll discover how much money is available to invest and what property you can afford.
Figuring out your cash flow will also help you determine your debt-to-income ratio – in simple terms, what size loan you can afford to pay. A typical debt-to-loan ratio is 28%, meaning that a lender will approve a mortgage loan where the repayments are 28% of your monthly income.
What other costs do I need to consider?
Loan costs
Besides the regular mortgage payments, there are other costs associated with your loan. Remember to include any establishment and bank application costs, as well as valuation and annual fees.
Purchase costs
Set aside money for stamp duty, registration fees and the cost of a solicitor or conveyancer. And don’t forget your building and pest inspections.
Insurance
Building insurance protects your investment property against fire, storms, theft and other risks, while Landlord Insurance provides cover if tenants damage your property or default on their rent.
Property management fees
While you can manage your investment property yourself, you may not have the time or expertise. Property managers generally charge 7-10% of your rent in property management fees.
Pisani Group has joined forces with Pisani Property Advisors to create a new Portfolio Management service! Now your accountant can work alongside your property manager to get the best financial outcome for you. We’ll keep you updated on the value and growth of your nest egg and provide support through the life of your investment.
We want to help grow your portfolio. Which is why Pisani clients will secure property management fees of 6.6%, including GST. That’s a saving of 2.2% off the industry standard. And while other property managers charge two weeks rent as a letting fee, Pisani Property Advisors is offering 50% off our letting fee by only requiring one week’s rent.
Find out more here.
Case studies
Here at Pisani Group and Pisani Property Advisors, we aim to save our clients time, money, and help you build your wealth. We do this through strategic planning and research, and a combined knowledge of tax and property, and a desire to see our clients succeed.
Case study #1
Our recent clients were a couple aged 45-55. They didn’t have a mortgage and had an annual income of $70,000 each.
Through our financial partners, we determined that they would be able to borrow up to $500,000 for a new or existing investment property, from which they could receive a cash return of $6,200 per annum. By contributing that amount into their super over ten years, they could save up to $151,558. Not mentioning the capital growth of their investment property at 3%, which could earn them an additional figure up to $157,000.
So how much did our clients benefit from an investment property? $308,558 over ten years. And all without affecting their day to day cash flow.
Case study #2
Another one of our recent clients was a young family with a $300,000 mortgage. The young parents had an annual income of $70,000 each.
Through our financial partners, we determined that they would be able to borrow up to $500,000 for a new or existing investment property, from which they could receive a cash return of $6,200 per annum. This new income could reduce their mortgage from a 30-year term to 18 years, saving the family over $90,000 in interest. And don’t forget the capital growth of their investment property at 3%, which could earn them an additional figure of up to $157,000.
So what was the net benefit to our happy family? $247,000 over ten years – without affecting their day to day cash flow.
Buying a home can be scary, whether it is a first home or an investment. Having been involved in buying and selling real estate for over a decade, Pisani Property Advisors can guide you to make the best decision for your financial future. Schedule an appointment with Kristy here to discover how we can create more wealth for you with your investment property.
