Three basic rules to maximise returns on property investment

The reason that many property investors get themselves into financial distress or do not maximise their returns on property investments is that they do not treat their property investment as a business. Three basic rules must be followed: 

Use an expert 

The number-one rule is to use experts in your team. 

Using a property expert to help you buy a superior property can effectivelly get you a “free” property. This is because a superior property growing at an average 10% annually over a cycle will double in value seven years earlier than a property growing at an average of, say, 5 %.

Working with an expert property accountant will advise you on all possible expenses to claim and help you determine whose name the property should be bought in. As an example, using superannuation can allow investors to buy property and claim negative gearing against their income that will later have zero tax on income or capital gains. 

It is surprising how many investors ignore or worse miss out on these opportunities. 

Manufacture equity 

The number two rule is: do not only rely on the market to give your market growth. Manufacture your own equity by buying a property that you can renovate. This will add both capital gains and rental benefits. 

Create a safety net 

The third rule is to create a safety net for the unexpected (interest rate increases, loss of tenant, major repairs, loss of job, etc.) so you do not have to rely on your wages to fund your property expenses. The safety net can come from access to equity to fund the unexpected. 

We call this a buffer, and it must be part of what your finance professional sets up for you.

Ken Raiss is a certified accountant and director of Chan & Naylor national accounting firm. Ken’s experience lies in working with large publically listed multi-national companies, which gives Ken excellent insight into international market trends. Ken specialises in educating “mum and dad” property investors and small business owners with advice on wealth creation, asset protection, taxation, superannuation and compliance.