When you invest in property, there are so many things to remember to ensure your investments are working in the direction of your wealth goals. From interest rate changes to the ups and downs of property prices, we’re here to help you remember a few key things to maximise the value you get from your investment properties. In this article, we outline a few of the common mistakes to avoid when it comes to property investment.
Not prioritising your debt
Debt is such a personal topic and most of us have it to some level. There are some types of debt you should pay off as quickly as you can, such as credit card debt. Other types of debt may provide you with a tax deduction, such as loans you have taken out to repair or improve your investment property. It’s a good idea to pay down any debt that won’t contribute to a larger tax return quickly. You can then start paying off tax-deductible debt when you can. Make sure you speak to a financial adviser so they can assess your unique situation and help you decide the best order to pay down your debt.
Forgetting to claim depreciation
A common area where property investors fall short at tax time is maximising their depreciation deductions. Maximising your depreciation claims can add thousands to your tax return when done correctly. If you haven’t had a depreciation schedule drawn up for your property, make sure you explore this to maximise your deductions.
Not increasing rents
It’s understandable to be really pleased with your tenants who are caring for your investment, and making rent payments on time. Having a great tenant in place is a really important aspect when investing in property. You might find yourself not wanting to increase the rent to meet the market in hope of keeping your tenants in the property. While it can have benefit to keep the rental price slightly under market in good faith for your tenants, you don’t want to find yourself in a situation where you need to increase your rent by over 20% to catch up on previous increases. When your lease is due for renewal or a rental adjustment, consider a small increase. A small increase is taken much easier for a tenant than a larger sting to catch up with market rent due to not increasing the rent for several terms.
Leaving your property vacant due to high rent
Take on the advice of a property manager when setting the rental amount. They are equipped with industry experience, current trends in the market and have a database of prospective tenants. Your property being vacant for even 1 week can undo any gains you may have seen through a rental price set too high.
Managing your own property
There are hundreds of little tasks and processes that go into efficiently managing a rental property. Leave the management of your property with a professional so you can focus on your investment strategy.
With so much to think about as an investor, we get that it can be difficult to see where you may be making some common investing mistakes. Being mindful of the pitfalls above can help you become a better investor and make sure you are always prepared to capitalise on new market opportunities.
Please consult your professional financial and legal advisors before making any decisions for yourself. Remember, this article does not constitute financial or legal advice however if you would like some assistance with this – we have partnered with some excellent advisors in this field.➞