Investing in property can be a very rewarding experience, especially when your tenant is paying your full mortgage, however there are a few questions you may want answered before you take the first step to building your portfolio.

Building an investment property portfolio is a wealth creation strategy that works on several levels. Reducing the tax you pay is one strategy and with the additional income and equity built over time, you then have leverage to purchase another. However with demand at an all time high in the Adelaide Hills and with rents rising, you just may be able to purchase your investment property and let your tenants pay the mortgage!

How does property compare with other investments?

Historically residential property has strong growth rates. It is one of the very few investments virtually guaranteed to create income. With property, you do have a level of control over your investment. When the time is right, you may wish to make upgrades to the property increasing the return, however with shares in the stock market there is nothing you can do to influence your return.

Property is a low-risk investment. Almost 70 per cent of the market is made up of homeowners, who underpin values, and the remainder of the market is tenants who ensure consistent rental income.

When is the best time to invest?

The timing is excellent now to start, or expand, your investment portfolio. Interest rates are at a record low and even with small rises imminent, they remain at the lowest point for decades.

Vacancy rates are low and rental returns are high throughout metropolitan and Adelaide Hills areas.

How will it affect my tax return?

Property investment works on several financial levels, including minimising the amount of tax that you are required to pay. You can claim deductions if your property is rented or available to rent. Management and maintenance costs, including interest on the loan, can generally be claimed against your current-year income. Depreciation and the cost of improvements can be deducted over several years.

What is negative gearing and how will it affect me?

Negative gearing refers to the situation where the cost of owning your investment property exceeds the rental income. The difference can be usually offset against your salary, or other income, and the savings are significant. Positive gearing on the other hand is better for lower income earners who wish to have a property pay for itself without any outgoings at all. Properties throughout the Hills are offering such returns with demand remaining strong from renters.

Should I buy a new or established property?

New properties provide maximum depreciation benefits. The building is more energy efficient and environmentally friendly than an older builder and will have lower maintenance costs. New apartments and homes attract tenants willing to pay a premium price. All of this results in a better and more consistent cash flow, which usually equates to a higher resale value.

What deposit do I need?

Experts suggest investors aim for 20 per cent, but it may be possible to enter the market with as little as 5 per cent. Mortgage insurance is not available for investment properties, so you may feel more confident with a larger investment. Don’t forget, your home equity can be used to invest in property.

Where should I invest?

Look for areas that are close to schools, shopping and transport. Tenants want facilities close by, so the more you have the better! The Adelaide Hills is performing strongly with demand at an all-time high and yields of approximately 5%.

Is there an advantage in debt consolidation?

Debt consolidation may be an easy way to free up cash to put towards your investment. The objective is to combine credit card and other types of debt in the one loan at a lower interest rate. You will save on fees and charges as you pay costs for one loan rather than several. Savings on monthly repayments can be significant.

Should I manage the property myself or hire a property manager?

The property manager is a professional who can look after everything to do with finding and managing tenants, maintenance and repairs, as well as advise you on your rights and responsibilities as a landlord. A good property manager will also ensure you have the best insurance policy for your investment and provide you with peace of mind throughout your investment journey.

Click here for advice for your property management needs.