When investing in property, the most important thing is not the property itself, but the finance. Unless the finance is in order it’s not worth going into the property, because you’ll lock yourself up, you’ll have no room to move, and the questions you have to ask yourself are: Can I afford it? Are you doing it for the right reasons? It shouldn’t interfere with your lifestyle. It’s very important to remember that – it has to be. If you’re going to go into a negatively geared property, and people always sell positively geared properties, any property can be positively geared if you put enough money into it. But there are opportunities to get positively geared properties which are rarer to get. Once that is established, you should look at your finances and perhaps consolidate some of your debts. Perhaps you think you can afford it but you can’t. You must ensure your budget is checked so that you can afford it. You also have to be aware that when you buy the investment property, it needs to be in a separate split. You have your house and land, or if you’re a first home buyer, then you have the split.
The tax office will want to see a complete separation between the investment property, and to know that you’re not using it to pay the bills and other things. A buffer needs to be put in place. A buffer can be an offset account out of the equity in your home, which just sits there so that when the rates and other minor things come in, they get paid out of the buffer and at tax time when you get that money back, that goes back into the buffer and so the cycle continues. Don’t ever go into property just because friends have done it. You should sit down and say ‘these are the reasons, this is the interest rate at the moment, what’s it going to be in three years time, can I afford it if the interest rate goes up by two points?’ Also, we like to finance it on the income of the main breadwinner. So if the husband or the male partner is the main breadwinner, we don’t like to, or if it’s unnecessary, we don’t want to tie up the partner’s finances in with the investment property, so that if the kid’s sick or if one partner gets sick, and only one partner is generating an income, you can still afford to run your investment property and maintain your lifestyle on one income.