Q How does DPN get paid?
DPN's services are provided to you free of charge. This is because DPN is paid by the vendor when a property is purchased through DPN. If DPN arranges finance, it is paid an upfront and trailing commission from the Lender.
Q Why invest in property?
Investing in property can provide income from rent, potentially replacing your work income over time. In addition, by holding your property long-term you can benefit from compound capital growth. This can provide leverage to draw equity from your property to grow your investment portfolio or access cash-flow by selling your property.
Q Can I afford an investment property?
Depending on your circumstances, with a deposit as low as $40,000 and income of $45,000 pa, you can start investing in property. If you don’t have a cash deposit, you can still access equity in an existing property or that of a supportive relative. Banks will allow you to access up to 80-90% of the value of your existing property, less the debt you owe against it.
Q What are the costs I need to consider?
While a deposit is the largest upfront cost when investing in property, there are other expenses involved. Typically, you will need to allow for a further 5% - 10% of the purchase price to cover:
- Stamp duty
- Legal costs
- Building and/or Pest inspections
- Home, Building and Landlord Insurances
- Lender’s Mortgage Insurance (if borrowing more than 80% of the property value)
- Council & Water Rates
- Strata or Body Corporate fees for apartments and townhouses
Q When is it a good time to invest in property?
When you can afford to do so and when you have a strategy in place. To maximise capital growth, start as soon as possible and hold property for as long as possible. Despite market fluctuations, property that is well located and receives a high rental yield will increase in value over time.
Q What if interest rates go up?
At some point interest rates will rise and it is important to implement the necessary strategies to manage this:
- Ensure you are borrowing within your means. This will allow you to ride an interest rate rise comfortably.
- If your loan is no longer the best rate available, consider refinancing.
- Confident you have the best rate? Choosing to ‘fix’ your investment property loan will give you certainty on what your repayments will be. Note that interest on investment properties is tax deductible, so your tax bill will be reduced.
- You may also consider raising the rent when interest rates go up.
- Remember, you can always consider an exit strategy such as selling your investment property or consolidating your portfolio.
Q What is Capital Gains Tax?
Capital Gains tax is paid on the increased value from the purchase price of your property at the time of sale. For example, if you purchase a property for $300,000 and sell it for $600,000, you will pay capital gains tax on $300,000. Note that if you ever sell, there’s a 50% discount on capital gains tax for investors who hold their property for 12 months or more.
Q What are the tax benefits of investing in property?
Reduce your taxable income by claiming the costs associated with property investment including:
- The day-to-day running of the property such as Real Estate management fees, council and water rates, repairs and maintenance etc.
- Loan establishment fees.
- Mortgage insurance.
- Interest on the loans.
- Newer buildings can claim depreciation of the building and fittings.
Q What if we can’t find a tenant for our investment property?
If you can’t find a tenant quickly, consider reducing your asking price to meet the market demand. This is often a small amount and your property manager can advise you accordingly. Landlords insurance can provide you with up to 52 weeks of rental cover in the event a tenant breaks their lease.
See our guarantees Tenant Gap and Rental Yield.
Q Who manages my rental property?
Your Property Manager is responsible for the maintenance and management of a property. They find prospective tenants, organise lease documentation, collect rent, handle maintenance and repair issues, respond to tenant complaints, organise rental reviews and perform regular inspections of the property. DPN will recommend a Property Manager who is an expert in your chosen suburb and has an excellent track record in landlord and tenant relations.
Q How long is the build time?
In NSW the following expected timeframes apply:
Council Approval - 6 - 12 weeks.
Standard Homes - 23 weeks
Dual Income Homes - 26 weeks.
In QLD the following expected timeframes apply:
Council Approval - 6 - 12 weeks
Standard homes - 14 - 18 weeks
Dual Income Homes - 16 - 20 weeks
In VIC the following expected timeframes apply:
Council Approval: 6 - 12 weeks (Can vary from Region to Region)
Standard Homes: 14 - 18 weeks.
*All timeframes subject to the terms and conditions of the build contract.
Q Should I buy properties in suburbs I know or that are close to my home?
Purchasing a property because it’s in a familiar suburb doesn’t necessarily make it a good investment choice. DPN’s proven research methodology identifies quality suburbs and provides detailed Property Profiles that include; demographic data, employment statistics and infrastructure plans so you can make an informed decision.
Q Are mining or resource boomtowns with high rental yields good investments?
New projects can create artificially high demand in the short-term which can be very appealing with high rents paying for all the property costs. However, the population growth is unlikely to be sustained over time to justify excessive rents. The probability of significant declines in rent and property values makes this a high-risk investment. As a result, banks are inclined to lend a lot less in boomtowns.
Q What about natural Disasters like floods or fire?
Natural disasters or accidents can be insured against but banks will not lend against properties in flood or fire risk areas. DPN only sources properties that can be fully insured against flood and fire.
Q Is it better to buy an established property versus a new property off the plan?
Building a new house, as part of a house and land package, is often a lot easier than perceived. Stamp duty is only paid on the land and the cost is often less than half of an established dwelling, even when you factor in holding costs during construction. There are also purpose built designs that can generate two rents from the one property, such as DPN’s Dual Income properties.
The information contained within this page is general in nature. It serves as a guide only and does not take into account your personal financial needs. Before you act on this information you should seek independent legal and financial advice.