We come across people all the time who are “doing their numbers” about property investments. So many people use this term, but what does it actually mean? It turns out that the “numbers” mean different things to different people.
For some people it simply means affordability. Whether they can meet their loan repayments, fund any renovations which may need to happen and feed the family.
For others, it means negative gearing opportunities. If this is the case they will need to make sure that they also get additional information such as a depreciation schedule. A depreciation schedule is a detailed document that includes a breakdown of all building allowance costs and a breakdown of all plant and equipment costs such as ovens, dishwashers, and carpet – even your garbage bins. It will also include the rates at which you can claim different items and the effective lifespan estimate of each item.
Some investors are only interested in high rental yields and are not concerned about capital growth while others want to balance the capital growth potential and the rental yield.
And then there are investors who like to add value by making improvements to a property. They need to be able to have a handle on renovation costs to ensure they don’t end up out of pocket.
There are a number of right ways and plenty of wrong ways to approach the “numbers” when it comes to property investment. We recommend you see a financial planner or accountant before you start your property search to find out which numbers you should be focussing on.
Published 31 May 2016.
DISCLAIMER: Please note: Good Deeds buyers tips are intended to be of a general nature. Please contact us for advice that is specific to your individual circumstances. You may also need to get advice from other professionals such as an accountant, mortgage broker, financial planner or solicitor.