Let's talk about rentals


 

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The Kinglake Ranges has always been a popular destination for investors.
In fact, many established residents have started in the area by purchasing a property, be it vacant land or an established home for rental investment, with the intention to move long-term.

Many homeowners, with great foresight, sat on these investments through seemingly slow fiscal years and either sold in peak markets down the line to move to Kinglake or swapped properties, renting the ‘suburban’ home in favour of raising the kids or retiring in the country. For some, the last 24 months of profitable returns has also been a bonus, allowing astute investors to buy and rent, buy and flip, or even do both in the same market and still come out ahead.

In two cases recently, Integrity facilitated multiple transactions where a client sold their first home, purchased an investment to flip, and secured another property with the intention of building their long-term home. In another case, Integrity sold vacant land for their client at top price so that they could secure a home in need of completion. That home could then be sold again in excess of the costs associated with completion.

Not only do these long-term business relationships mean that aware buyers know exactly which agency to do their shopping through, it also allows clients access to reduced commissions for repeat business and a completely dedicated, loyal, and personal service with Integrity Real Estate (we are a family company after all, and service is of paramount importance).

In these examples, the evidence of a diverse investment market can be seen. The options are many, but it is not something that is necessarily easy. Often patience, common sense, and good advice go together in this case.

Different genres of property lend themselves to different circumstances. So, what is the right decision for you? Are you a homeowner considering upsizing/downsizing? Or would you like to purchase an investment to offset your income, or perhaps add a bit more passive cash in the bank?

This is the first decision to make when considering a rental investment, otherwise known as positive or negative gearing. In simple terms, a rental (depending on the rent received each month) will either cover the cost of the mortgage on the property or it won’t. If it is less, then the difference or the loss (as well as other outgoings) can be used to access a suite of tax benefits (consult your financial advisor for in-depth advice).

On the other hand, it may be more beneficial to secure an affordable rental investment that can be positive geared – where the rental income is more than the mortgage repayments each week.

Have you thrust this copy of the Mountain Monthly into your kids’ hands yet? That might be a good idea. If your child is working towards saving their deposit, this is always a great end goal. Achieve 5 per cent or 10 per cent of the price you aspire to buy, and use the government kick-backs available to first home buyers to secure a home that can be lived in for 12 months (12 months of not cooking dinner). Then perhaps consider renting that property out (if mum and dad will have you back).

For all investors, once you have decided what tactic you are going to adopt, it is important to meet with your broker. If you have not worked with a broker before, consult your nearest Mountain Monthly or drop into the Integrity office to pick up the business card of one of our professional local mortgage brokers.

In the current climate it is wise to lock in your interest rate as soon as you are able, as we cannot guarantee how long conditions will remain this lucrative. Investors should also strongly consider the implications of going interest- only on their mortgage and decide whether it would be better if they reduce the principal at the same time.

For investors already well- positioned in the market, there are other concerns to take on board. As a landlord, when is a good time to sell your investment? The answer is, when you can do better things with that money.

For example, if you are looking in other markets where prices seem affordable, it may be worth selling one investment in a high-growth area like Castella, Kinglake, or Kinglake West in order to purchase perhaps two investment properties that would rent for more than what your current property could.

This may empower you to divide one asset into two. Otherwise, if a property has performed well for you, and you are able to secure
a good tenant, your only concern should be locking in a competitive Rental Management Rate with a competent agent and watch the income roll in.

Make sure your agent is constantly updating you as to the state of the market, informing you of sale results as well as current rental values. Keep in mind that a good long-term tenant is often more valuable than a few dollars increase on the rent, however this is also worth weighing up against the growth that your property is likely to encounter as we go forward into the future.

As always, if you are a first home buyer, a homeowner, a current investor, or simply curious, you can always get in touch with one of our friendly Sales Agents at the Kinglake Office on 5786 2033. We look forward to your call.

Rob Verhagen