Smart tips for investors
While the property market is not in the rosiest part of the cycle at the moment, there are plenty of opportunities for smart property investors. Here are some smart tips for property investors.
• Use a bond originator to structure your finance application. Their expertise is invaluable in obtaining the right finance at the best rate, and it is available to you free of charge.
When applying for property finance, try for a 100% bond, even if you have a deposit. Once the bond is approved, pay in your deposit, but retain access to it. Ask your bank to reduce the payment for the reduced balance, to create flexibility for yourself whilst reducing the pressure on your cash flow.
•Remember the Rule of 3. A rate of 3% above prime to confirm affordability, access to 3 months repayments and a 30% deposit. That way you and your bond will not part company!
•Simplify the administration by registering a single bond per entity. If you have a CC and you purchase three properties, you can register one bond in the name of the CC instead of one bond over each property. However, be aware that the transfer duty is structured differently for a CC than if the property is registered in your personal name.
•Apart from your costs in maintaining the premises, your main tax claim is for interest. Keep your year-end statement from your bank, normally sent out in March for February, for this purpose.
•Maximise capital growth whilst minimising tax. Pay off your bond to the point that you begin to earn taxable income. Then you buy another investment and use the surplus income from the first property to subsidise the payment of the new acquisition. That way you avoid tax and create the base to enjoy capital growth in the long-term.