We sat down with REIF’s Founder, David Chehade, to share some common signs that your investment property isn’t working for you….
There are a few sure-fire signs that your investment property isn’t working for you. When investing in real estate it’s crucial that you feel confident in your strategy and understand if it’s going to benefit you from the immediate to long-term. In this article we’ll be sharing David Chehade’s biggest warning signs that your property investment isn’t working for you and ways that you can avoid it.
The signs your investment property isn’t working for you
The biggest signs that your rental property isn’t working for you are:
** Note: this information is general in nature. It’s important to consult an expert to get specific advice regarding your individual circumstances before making any decisions that could impact your investment strategy. **
You’re holding onto a property investment in a stagnant or declining market
If you’ve owned a rental property for several years and have found that from a capital growth perspective it hasn’t been able to grow, it may be possible that it’s not working for you. If its value has remained stagnant or declined over several years, you might need to review your strategy.
There’s no doubt that the Australian property market fluctuates. It’s important that you are buying in locations that are forecasted for capital growth to make long-term gain. Though, if it’s been several years that you’ve held a property and it’s not grown in value, you might need to re-evaluate if it’s working for you.
To avoid or resolve this issue, you could consider:
As a smart property investor, you should do your due diligence research markets that will perform well in the long-term
Getting a property valuation assessment to see how your property is performing in comparison to other investment properties in yours or surrounding markets
Sell your property if it’s not producing or expected to produce the results you desire and reinvest in an Australian property market that’s forecasted for capital growth
Consult with a financial planner or property investment expert to see what they’d suggest doing
Your property isn’t producing any returns
As a smart property investor, it’s crucial that your investment property works with your investment strategy. A good indicator that your rental property isn’t quite working for you is when it’s negatively geared and even after you claim your net loss at tax time, it’s still not generating you any returns.
While negative gearing is a strategy that’s good in the long-term, you need to be confident in waiting for long-term returns (from a capital growth perspective). If you’re after instant returns, this may not be a strategy for you. Please refer to the table below which highlights the difference between negatively geared and positively geared investment properties.
You’re spending more money than you make
Off the back of the first two signs, another sign that your investment property may not be working for you is when you find that you’re spending more money to run it than you make from it. It could be because it’s an old property that’s constantly undergoing repairs, or you may be paying higher fees relating to rates or finance lending.
If you find that you’re spending more money than what you make (even after claiming expenses on tax), you should weigh up if the property is appropriate for you.
As a smart property investor, there are a few things that you can do to ensure that your property isn’t putting you at a loss. They include:
Consulting with your accountant to see what expenses you can claim at tax time
Investing in new properties to recoup maximum tax benefits and reduce the risk and need of repairing maintenance issues
Reviewing whether your property is expected to produce long-term capital growth and weigh up if you’re comfortable waiting a period to generate returns upon selling
Review your expenses and look for more suitable rates
Consult your finance broker every few years to look beneficial finance mortgage rates
Learn more
If you’re wanting to learn more about the various investment strategies or good property investment opportunities throughout the Australian property market, take action. REIF are helping a vast number of property investors generate wealth for their financial future.
Give us a call on 1300 130 932. Or feel free to download our free eBook ‘Building Wealth Through Property’ by clicking the button below.
