Having your first lot of tenants move in is exciting, but it is only the beginning. You want this well earned asset to keep bringing you income for many years to come.
Here are some of the tips and tricks we’ve learnt over the years that have helped build an impressive property portfolio that keeps delivering healthy returns.
On the go? Here’s 30 seconds of key take outs:
- Take some time out to celebrate the day your tenants move in. You’ve earned it.
- Having a tenancy agreement in place is the beginning of an exciting adventure. Now you’ve celebrated, it’s time to get serious again.
- To invest to the next level, you’ll need to invest some time and focus on keeping your property earning you a decent income over the long term. We’ll cover some of the steps you need to take periodically to ensure your asset keeps delivering cash flow to your pocket, or savings plan.Keep reading >>Signing up your first tenants is a reason to celebrate. Once you’ve taken a moment to have a bit of fun and raise a toast to the beginning of a bright financial future, it’s time to get serious again.From the moment your tenants move in, you need to stay on top of all your documentation to keep your tax bill to a minimum; regularly monitor the property and rental market; and regularly refresh your financial goals and review your progress toward them.With a professional team of property experts supporting you, you can invest to the next level. The secret lies in remaining fully aware of your financial situation by reviewing it regularly.What do I need to do to keep my property earning a decent income?Glad you asked! Take a deep breath. Here is your to-do list for the rest of your property investing career:
- Keep all your documents ship shape in one central spot and well organised
- Monitor interest rates and the rental market
- If you’ve found good tenants, look after them
- Regularly review your financial situation, your lifestyle goals and your progress toward them
- Continue your savings plan so you can buy your next property
- Secure credit at the top of the market.
We’ll cover some of these in more detail below, but make sure you bookmark Capital Properties website as a ‘Favourite’ for your go-to for information about investing in property. If you’re not already, make sure you join our social media conversations so you don’t miss out when we share free information or invitations to events.
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Our Pinnacle Support Program will ensure you continue to be a switched-on property investor. Going it alone is brave, but leveraging the expertise and decades of experience of professional property investment consultants is smart.
Monitor and review and do it all over again, and again!
Five years from now, the property and rental markets will shift. You need to stay aware of market moves so you can make preparations for your next moves to ensure your property asset is working for you.
Here are some of the facts and figures you’ll need to stay up to date on:
- State and local property market statistics: we can help! Download our free Australian Property Market Report at Capital Properties > Promotions. You’ll need to get actively involved by reviewing property market indicators on a regular basis, and at least twice a year.
- Your cash flow at any moment in time: we can help here too. Use our free spreadsheet to keep a track of your cash flow. Download it from Capital Properties > Investor Tools & Apps > Rental Property Calculator. Ideally, schedule in some time once every quarter so you know where you’re at throughout the year.
- The taxation benefits available to you: a checklist is the best way to approach this, so that you can organise the documentation for your accountant without missing a beat. Download our Capital Properties’ Tax Check List to guide you.
- The loan and interest rate market: book in a conversation with your mortgage broker periodically to stay on top of what’s available to keep your cash flow as healthy as it can be. I’d recommend checking in once a year at the bare minimum, and ideally, six monthly.
- The rental market and vacancy rates: a good quality property manager or managing agent will be a great resource. Book in some time to review your rental returns every six to twelve months.
Secure credit when median house prices are at a high
Ideally, you want to be securing your property investment loan, when the value of your property is at its peak. What?! Why? Because, the more the lender sees your property is worth, the more the lender will want to carry your debt for you!
There is nothing clairvoyant-like about predicting when a property market will reach its peak. Understanding the history of property markets can help you understand where the market may be heading.
Property markets can take a while to cycle through. For example, the Sydney property market was relatively flat from 2003, and after the Sydney Olympic Games. It took at least nine years to start seeing some decent growth. Check out the graph below [Sydney in the blue], and consider that in the end 2016, Sydney Metro was pushing up well over the $1 million dollar mark.
Sometimes you need to wait it out! A good strategy is to diversify by investing in properties in different States. Then, as one State’s median house price pushes up you can then look at unlocking some of the equity from the property you own in that State.
Check for yourself what the Sydney property market did after 2012! Imagine if you’d bought a property in 2003, and got restless three years in. You’d still be sharing tales of woe if you sold prior to 2009.
A question I’m asked regularly is whether to sell a property when the market is at ’12 o’clock’, that is, at a property cycle peak.
I wouldn’t recommend it, as tempting as it seems. An early-in-their-career property investor won’t have seen a full property cycle. This means that selling at the first peak may mean you’ve pulled out too early. Going back to the graph, the temptation to sell in 2010 would have been high. But look at what’s happened since!
In this trade, it is capital you’re after. At a 12 o’clock market it’s time to get your property valued. If you can get a strong valuation of more than thirty percent of equity you could hold on to the property and increase your cash flow. Setting up a line of credit based on the higher valuation will free up cash. At the same time, the interest you pay on the loan reduces the tax you end up having to pay.
How to stay on top of the property market
You can achieve the strategy I’ve suggested above by consistently monitoring the capital city and local property markets. Book in property valuations on a regular basis. Chat with your mortgage broker about valuations. Mortgage brokers can get free desk top, curb side and full valuations because it is part of what they need to do to stay in business. Make the most of it!
Monitor and claim all tax benefits
Remember, any opportunity to reduce your tax means cash back in your pocket. So get organised, keep all your documentation neatly filed in one spot and find a good accountant that knows their stuff when it comes to property investors and tax benefits.
Making your accountant or tax agent work through a shoe box of receipts is a waste of their expertise and your money, given many still charge in 15 minute increments!
Here are some tips for keeping all your investment related documents ship-shape and cash flow friendly:
- Hit an office stationery store: invest in an expanding file, or a display book or folder with clear plastic sleeves.
- File paper and softcopy documents the day you receive them: get into the habit of filing receipts and statements as soon as you open them.
- Set up a simple spreadsheet to support your new filing system: it’ll help you get a clear sense of when invoices are coming up for payment. You’ll be able to crunch some numbers before you visit your accountant. Getting familiar with the numbers will help you focus on asking the right questions, to get the best of your accountant’s expertise.
Now you and your accountant can discuss valuable topics such as tax minimisation strategies. Take the Capital Quiz to help you assess how ship shape your record keeping skills are.
In summary, to keep your property or properties earning you income, you’ll need to invest time and focus on monitoring the property markets to unlock equity and secure credit at opportune times in the property cycle. Meanwhile, stay organised with documentation to help keep your tax bill down.
Happy property investing to you!
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