FAQ's
Frequently Asked Questions
When should I sell my investment property?
The short answer is NEVER – property is a long term investment. This is one of the key principles of investing for wealth creation. Property prices do not go up 10% every year – but instead, history has showed this increase occurs on average over a 7 - 14 year timeframe. Over the long term, property investors achieve sustained long term returns.
The costs involved in purchasing the property, stamp duty and mortgage insurance and the taxes and costs you pay when you sell, real estate costs, capital gains tax etc are expensive.
What happens if interest rates rise?
The few options you have if interest rate increases are a concern to you:
- Lock in your rates for 1-3 years
- Have a risk management (surplus funds in you Line of Credit) to help you with the repayments without affecting your income
- Allow for the cash from the extra tax deduction you will receive
- Increase your rent on the new lease of your property.
What if I can’t get anyone to rent my property?
Rents fluctuate just as capital growth fluctuates. It is important when selecting your investment that you look at high density areas. The more people you have living in an area, the more opportunity you have to find more tenants. It all hinges on supply and demand. Buying in the right location is crucial and that’s why we at PISA take care in selecting the right properties for our clients.
If my bank rejects my loan application, what should I do?
PISA has experienced mortgage brokers with up to 30 banks to choose from. Some banks have stricter criteria than others and there may be a lender who can help you. We are happy to refer you to the experts, please let us know if you need help.
Are Houses a better investment that Townhouses and Apartments?
Have you ever noticed - Houses have gardens that tenants do not want to maintain. With Townhouses and Apartments the external areas are cared for by the Body Corporate and this saves a lot of time and effort for the investor. Residex November 2009 newsletter reported that units and apartments had higher capital growth than houses and this is likely to continue. www.residex.com.au
Should I buy old or new property?
New Property has many advantages, firstly, you can claim maximum tax advantages for depreciation and secondly, there is much less maintenance on a new property.
Will I ever be debt free on my investment properties?
Your investment properties are a vehicle for wealth creation. The object is to obtain capital growth and maximize taxation benefits available. If you pay the loan down you cannot claim these benefits. Once your property has obtained good capital growth you release the equity and increase your portfolio. The only loans you should pay off are the non-tax deductible loans – home loan, car loans and credit cards.
Why hasn’t my Accountant or Advisors told me about Investing in Property?
Probably because they don’t invest in property themselves!
Am I putting the family home at risk if I buy an investment property?
Education is the best weapon for combating this fear. More often than not we find one partner wants to buy a property and the other is too scared. When we explain the Exit Strategy and Risk Management required when you invest in property, this gives you the knowledge of your financial position should you need to sell the property due to unforeseen circumstances.