When buying a rental property, your priorities will be a little different. Rather than thinking about a bridging loan, you'll be more concerned with securing the appropriate interest-only investment loan. Instead of getting caught up with moving day jitters, you'll instead be on the hunt for quality tenants. Plus, you'll also need to look to the months and years ahead - who will your tenants be?
What doesn't change is the process from purchase to handover. Having an understanding of how the property purchasing process works will ensure making the leap from homeowner to investor is a streamlined one.
Sign the contract of sale
In order to become the owner of a house or unit, you'll need to sign a contract of sale.
This will include important details, from the price and the deposit required to a description of the property and the parties involved. The agreement will also list which chattels are included. If you're buying an off-the-plan property, you'll want to obtain an overview of the house and land construction process.
If the contract of sale is conditional, it will become binding on a specified condition being met, such as a satisfactory building report.
You'll need to consult with a conveyancer or property solicitor before signing the contract to ensure everything is watertight.
A deposit is generally around 10 per cent of the purchase price. You'll do this immediately after signing the contract of sale.
Complete your due diligence
It's essential to run through the appropriate checks, such as obtaining building and pest reports, before settlement day.
Leading up to settlement day, your solicitor or conveyancer will arrange a transfer of land document, which you'll have to sign. They will also run a title search to check whether there are any easements or encumbrances over the property.
Obtaining building and landlord insurance is essential if you're serious about protecting your investment.
Just like an everyday homeowner, you'll want to protect your home against damage and destruction caused by fire, flooding, theft and vandalism.
However, you'll have additional concerns as a landlord: your tenants. If you complete the right vetting process, you should find yourself with reliable, tidy tenants. The most careful of tenants could still be careless, while the worst tenants on the books can be downright malicious.
Either way, you'll want to protect your investment from tenant-caused damage, whether it's deliberate or not. If you provide chattels, you can protect against theft, too.
Hire a property manager
While insurance is essential for your own peace of mind, you can largely avoid issues with troublesome tenants by getting experts involved from the get-go.
A property manager can help find tenants who will pay rent on time and keep the property in good condition. They will also take over day-to-day management of the property, from communicating with the tenants to organising necessary repairs.
This gives you more time to get on with your everyday life, which can be demanding in itself. A property manager is well versed in tenancy law, which is a further benefit.
Get ready to settle
The balance of the purchase price is due on settlement day, so it's essential to have your loan agreement sorted well in advance.
You'll need to pay stamp duty, which differs from state to state - you'll receive documents regarding this upon settlement.
Once you've got the keys, your rental property is all yours.
Owners of rental properties can claim deductions for a decline in value of depreciating assets, such as fridges and stoves. This is a tax benefit associated with owning rental property.
If your property is negatively geared, you may find that claiming for rental expenses leads to a tax refund when completing your tax return. Accordingly, you can reduce your rate of withholding by completing a PAYG withholding variation application, the Australian Taxation Office explains.