Nine New Year’s Resolutions for Property Owners and Investors

Photo: Auburn Alumni Association, Creative Commons

New Year’s resolutions are often forgotten soon after the last of the leftover turkey has been consumed.

Planning and commitment are crucial to making sure that you execute your financial goals.

Here are a few check points to consider when mapping your property journey for this year:

No One Gets Rich Spending Everything They Earn (or More)

Sad, but true – the first step to saving money is knowing exactly how much you earn and where it is being spent.

It might make you cringe, but a budget could be the solution. If you spend less, you can save more.

Some swear by the principle of “paying yourself first” – that is, before paying other bills, move a set amount (set up an automatic transfer) into a high-interest emergency account, or into a mortgage offset account.

How to Give the Banks as Little of Your Hard-Earned as Possible

With interest rates at historic lows, it is worth taking advantage – anyone paying a major bank its full advertised rate, in particular, should be speaking to their lender or mortgage broker.

Deals change, and sometimes a simple phone call to your current lender’s ‘customer retention team”’ can produce a cut.

If not, you may need to apply elsewhere.

Measuring and Benchmarking your Returns

Do you know what your property is worth? How is its value trending against similar properties in other areas?

If it’s an investment property, how does the rent you’re receiving compare with advertised vacancies of a similar standard? Should you be putting up the rent?

Without measuring these factors, it’s hard to know where you stand.

How to Give the Tax Man Less of Your Pay Cheque

If your investment property is negatively geared, it could be worth submitting an income tax variation form.

This means that instead of getting a lump sum refund at the end of the financial year, less tax is taken out of your pay in the first place.

The extra money can be used to save or reduce debt, or it could be placed into an offset account.

Note: Undisciplined spenders might be better off keeping to the lump sum refund as ‘enforced savings’.

Claiming All You’re Entitled to – Including Depreciation

Keeping organised with receipts helps you claim all you are entitled to at tax time, but many property investors forget to claim depreciation.

Depreciation is an allowance for the extent to which the fittings decrease in value each year, not a cash outlay.

To claim it, you need a professional to prepare a depreciation schedule. Even older properties usually have some depreciation claimable.

Being Strategic When it Comes to Debt

There is no one-size-fits-all formula but, in general, consider repaying extra on debts which are not tax deductible (your home mortgage, credit cards) before putting more than the minimum into deductible loans (for investment property or shares).

Offset Accounts Offer Flexibility

If you are buying a first home that you intend to turn into an investment property in the future, speak to your adviser about using an offset account instead of just paying the loan off as fast as possible – you could be left in a more favourable tax position down the track.

Offset accounts can also be useful for those who want extra flexibility, for example, when contemplating a family or when work is intermittent.

Protecting Your Assets – Including Yourself

You work hard to acquire assets, so it makes sense to protect them and protect your ability to pay for them.

Having the right insurance for your needs is not only the responsible thing to do, it is imperative should the unexpected happen.

Insurance policies vary, so look for value for money and extent of cover, not just the cheapest premium.

Investing in Yourself

Learning new skills and taking on new responsibilities can help you expand your pay packet – and your property investment portfolio.

Becoming educated in property investment can also pay by helping you choose properties wisely, as not all investments provide equal returns and different strategies suit people in different situations.

The points above are general in nature – everyone’s situation is different – so consult your advisers for detailed information appropriate to your situation… and good luck for 2014!