Business owners are already under the pump all the time due to everyday pressures and business demands, however many of them don’t realise that they would be a great candidate for building a rewarding property portfolio. It is time to start shopping around, entrepreneurs are well-known for pouring their hard-earned bucks back in their businesses, but they don’t always realise that the property market presents some great opportunity to make some gains and benefit the business. A property portfolio can provide extra cash flow, reduce your tax liability and also be borrowed against if occasions call for this. Many smart business owners are able to create additional wealth with an investment property that is another source income that is separate from their core business. In the following article, we look at the few things business owners need to look at when taking the plunge into the real estate investment industry.
Know your objectives
Every investor would have different goals and desires as well as resources to spend. Whether your aim is long-term future capital growth or possibly a side additional revenue stream, there are ways to maximise your goals. It is quite common to be able to achieve one of the objectives, but challenging and rare to achieve both.
Those whose cash flow is a little tight may look for a cash-generating property using a greater rental yield, such as an inner-city apartment. However, if cash flow is not an issue you could shoot for the bigger prize of capital growth by choosing a property with a greater land element.
High-quality family houses are usually more pricey than apartments and units and may generate lower rental income, however, the long-term capital growth may be greater. Invest in a top business advisor to break down the capabilities of your business to see what you will be able to purchase with current resources.
Consider your available time commitments
Most company owners are pressed for time. While those with a passion for renovations and real estate in their own spare time might attempt to raise their capital gain by purchasing a property that needs some DIY work, but many busy business owners will want something less involved easier to maintain.
A comprehensive inspection from a specialist can highlight maintenance issues you may not have considered. You will want to know whether the house is old and requires rewiring or has things such as early-stage rot from the floorboards or a damaging pest problem. If you plan to reside in the house, is it a lengthy commute from where your business is? Does this have a high maintenance garden which will whittle away at your leisure time? If you are planning to rent out the property, it is a good idea to acquire the help of an experienced property manager to take care of collecting rent, bookkeeping and maintenance inspections.
Enjoy the full benefits
If you are living in the house as an owner-occupier, you may enjoy an exemption from capital gains tax when you sell your own home and can find it easier to get a mortgage approved. You may even be able to access the First Home Owner Grant.
But chances are as a business operator, investment properties will supply a larger tax advantage. You may have the ability to secure an interest-only loan may make the property easier to hold long duration, and claim a range of allowable expenses on investment properties like interest, maintenance, and rates. Negative gearing is especially beneficial for reducing tax liability. Make certain that you get the full advantages of depreciation.
Get the timing right
Dips or shocks to land valuation do occur and, while great property pops back and recovers, you simply get the advantage if you’re able to continue to maintain the advantage long term. Successful property investors need an element of boldness and risk-taking but also have realistic expectations and be mindful of the sustainability of long-term gains. Business owners looking to invest should consider their current and future cash flow to understand the investment requirements.
Timing the industry well may bring forward the day when you begin to enjoy a massive equity return, that brings flexibility and freedom. Keeping an eye on economic cycles may be able to counteract the effect of cyclical movements and make the most of downturns when costs are lower. It is all about planning and getting adequate strategic business advice according to your industry and demand swings.
Do your research
There are many resources available now for real estate research which may place you in a much better position to negotiate with the agent or seller. Online property sales services may tell you a home’s earnings history and provide you a record of comparable properties in the region and what they sold for. Is the median price at the suburb you’re thinking about climbing, flat-lining or falling? How has it weathered downturns like the fiscal crisis? Is the variety of houses available in the region falling or rising? Look at who is in the rental market for the area and what their requirements are if there is a surplus of apartments already in the area then it may be difficult to find a tenant. Perhaps you could look into buying a retail property or commercial property to attract other business tenants? Don’t forget to consider ongoing running costs and overheads of having an investment property, these included council rates, body corporate fees and management fees. Business owners who are organised and switched on will have no problem balancing property and a business, however, there is no room for sloppiness or laziness. Property investment is like another job on top of everything else.
