Six things to consider before investing in property

Buying an investment property can seem like a smart way to enter the market while enjoying tax perks and a rental income.

However, if you don’t plan for vacancies, repairs or potential interest rate rises, your investment dream could become an investment nightmare. Here’s 6 things to consider when investing in property to ensure you’ve covered all aspects of being an investor.

1. What’s your motivation?

A quality property can be an excellent long-term asset that can help you achieve important goals like building personal wealth or saving for retirement. Think carefully about why you are investing in property – what are your goals, and will a rental property help you achieve them?

2. Do you have a long-term outlook?

Buying and selling an investment property involves paying a range of costs like stamp duty, legal fees and your agent’s selling commission. These can amount to tens of thousands of dollars, and it will take time for your property to sufficiently rise in value to recoup these transaction costs. This explains why property is regarded as a long-term asset – one you should ideally be prepared to hold onto for several years.

This long-term approach means a rental property should fit your lifestyle – not just today but further down the track also. You don’t want to be in a position where a change in work or lifestyle means you have to sell the place prematurely and potentially cut short any profits on sale.

3. Are you comfortable taking on an investment loan?

Investing in a property usually calls for funding through an investment loan. On the plus side, the loan interest can normally be claimed on tax, which helps to reduce the cost. Be sure to crunch the numbers to see how your cash flow could be impacted by any possible future rate increases – you may not be able to raise the rent immediately following an increase in the loan rate.

4. Can your budget handle periods of vacancy?

The rental income earned on an investment property can go a long way towards paying off your investment loan. However, most rental properties experience periods of vacancy from time to time. Be sure your budget can handle these no-rent periods – no matter how brief.

5. How will you manage big-ticket repair bills?

All properties need regular maintenance but even with the best of care, various items will need replacing at some stage. This can leave you facing bills for something like a new stove, a broken window, or even major roof repairs. It’s worth having a slush fund of cash to cover these expenses – or at least a back-up source of funds that you can draw on in an emergency.

6. Don’t be blinded by tax perks

Property is a very tax-friendly investment, and if the rental income doesn’t cover all the costs of owning the property (including loan interest), the resulting annual loss can normally be claimed on tax. This is what negative gearing is all about, and it’s a way of clawing back some of the tax paid on your regular wage or salary.

These tax savings are a real plus but don’t let tax perks be your main motivation for investing. A good investment property should stand on its own merits, delivering ongoing income and rising in value over time. Any tax benefits should be the icing on the cake – not the number one driver for becoming a property investor.

If you’re confident you have all your bases covered, it’s time to talk to us to discover your borrowing power and get started putting your plans to invest into action.

About the author

Matt Carra

Matt Carra

Matt Carra is the Owner of Blue Key Finance, a Finance Broker since 2004, an SMSF Lending Specialist, a Property Investment Educator, and a Mentor to new Finance Brokers entering the finance industry. Matt is passionate about providing valuable guidance and honest advice, educating Australians on how to buy their first homes and invest successfully while protecting them with knowledge. Matt has strong long-term relationships with his panel of lenders and extensive knowledge on their credit policies, and utilises that skillset to give you peace of mind by recommending you to the right lender the first time, to negotiate a better deal, and to fight for your cause – that’s Matt’s commitment to you. Contact Matt today to start the conversation on 0425 726 538 or email

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