I was thinking about buying a property...I saw that some prices are tending to decrease. Is it a good time to do it? Or should I wait? I was waiting to have a higher down payment but maybe there are interest benefits currently that allow me to buy at an overall lower price.
Stacey in Wellers Hill, Qld
Top answer provided by:
Hi Stacey, property can be a great investment but should be viewed as a long-term investment (at least 10 years) and therefore short-term price fluctuations should not be a consideration when deciding to invest. Whilst some recent decreases might make a property purchase look attractive there is much to consider and evaluate before rushing into a purchase.
Before considering any type of investment your first step should be to look at your personal cash flow and budget. Look at all your costs and expenses and when you subtract this from your income you are then left with your surplus cash. This surplus is what you have available every month to invest while still maintaining your current lifestyle. Make sure you consider any expenses that may be coming up but haven’t started yet such as day care fees, school costs or even any upcoming car purchases.
Now that you know the amount that you have available and can afford to use for investments every month you should look at the costs of owning an investment property (or any other type of investment you may be considering) which may include loan repayments, strata fees and council rates. You should also allow some money in your budget to cover any emergency maintenance costs as well as any periods that the property may be vacant and not earning you an income.
You will also need to consider any upfront costs involved in purchasing a property such as a deposit (usually 10%) and stamp duty as well as any conveyancing costs. There may be some Government grants available to help with these upfront costs, but this will depend on your individual circumstances and the State in which the property is located.
Depending on the running costs of the property and the rental income achieved you may be entitled to claim negative gearing benefits. A property is negatively geared when your rental return is less than your interest payments and other property related expenses. The key benefit of negative gearing is that any net rental loss you incur may be offset against other income you earn. This reduces your taxable income and therefore reduces how much tax you have to pay.
Once you are comfortable with all of the above costs then you can move forward with the property purchase confident that you have an affordable investment strategy.
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