Capital gains: How to make your first property investment a success
The end goal of investing is to make money. One of the best ways to maximise your profits from property is to ensure your investment experiences capital gains (a fact that all investors will be well aware of). In the current Australian property market, that shouldn't be a problem, but there are certain ways that you could make more and increase your chances of enjoying a larger profit.
Whether you have the market mapped out or are a fledgling investor, there's always more that you can do, so read on to discover four top tips to help you make your property investment a success.
Don't assume that the best capital gains can be made in high density city areas.
Research the location
Don't assume that the best capital gains can be made in high density city areas. The fact is, most of the suburbs enjoying massive value growth are regional areas, or suburbs that you may not have expected.
For example, during the 12 months to June 2015, Sydney property experienced value growth of 14.5 per cent as found by an NAB report compiled using CoreLogic RP data. This figure is certainly impressive and could net you a tidy profit if you bought and sold at the right time. However assuming you're buying around the Sydney median property value. This would mean a capital outlay of nearly a million dollars, according CoreLogic data.
Buy somewhere a little bit left of field and you may find your results are even better. Take South Granville in Parramatta, for example – with a median house value of $766,990, this Sydney suburb experienced impressive value increases of almost 40 per cent from 2014 to 2015, as reported by the NAB. This means that if you bought a home there worth $1 million in 2014, you could have sold it for a cool $1.4 million in 2015, or perhaps even more in 2016.
Renovating can add value to your home, if you do it right. Home renovations are forecasted by the Housing Industry Association to exceed $30 billion in Australia in 2016 and 2017. This figure proves that Aussies are renovating en-masse, but are they doing so effectively?
A recent Real Estate Buyer's Agent's Association report clarified how to renovate the the right way, revealing the top 10 things Aussies want in a home, including a level yard, open plan living areas and natural light.
Instead of renovating your entire home, focusing on these aspects could net you a larger value increase than more costly modifications, such as full kitchen or bathroom do-overs. Natural light in your home can easily be improved by trimming back trees covering windows, and your yard can add to your homes perceived value if it's well maintained and presented. Open-plan living areas may be a slightly more costly renovation, requiring labourers and materials, but could massively increase the value of your home in the long run, for a comparatively small investment.
Always be thorough when recording expenses incurred from owning, buying or selling property.
Minimise your tax
There are several legal methods of reducing the amount of capital gains tax on your property. Employing these strategies could save you tens of thousands of dollars , making your property investment even more successful.
One of the simpler strategies available to you is to simply hold your property for more than 12 months. Doing so will mean you pay half the capital gains tax, an amount which is a considerable amount.
Another way to reduce the amount of capital gains tax you pay is to always be thorough when recording expenses incurred from owning, buying or selling the property. These can be used to offset the amount of profit you made from the property and therefor the amount of money you are taxed on.
Such expenses can include conveyance fees, building inspections, renovations, property maintenance and even travel costs when visiting the property. If you're unsure of what these may be, talk to an experienced buyer's agent or accountant and they will point you in the right direction.
Consider an off-market purchase
Auctions are fuelled by excitement and competition that can cause homes to sell for far more than they are worth. Obviously, buying a home to sell for a profit in such a situation can be counter-productive, so it may be wise to consider other options of sale.
Private house sales, for example, can net you a better-value property as you may not be competing against other buyers. For the average Aussie, such a sale may be difficult to access.
Using a buyer's agent can make it a breeze to do so, as they can use their immense knowledge of the market, network of contacts and experience to find you the perfect seller. What's more buyer's agents are legally required to work in your best interests, so you can be absolutely sure that they are doing everything they can to help you find the perfect investment property.