While securing a high-performing investment property in a location that yields demand is integral to carving a profitable gain in real estate, there’s also the formalities that need to be unpacked beforehand.
One of these is obtaining a suitable property structure when purchasing an investment, as the wrong one can end up reeling back the full surge of your cash flow. As it rings true, it’s not only what you purchase but how you purchase it.
Property investing coach and director of The Property Bloke, Wayne Jessup, says that he regularly sees investors falling short of structuring their loans correctly, and in a way in which it will work in their favour.
“People don’t realize the tax advantages with some of the loan structures and how they can be if they’re set up incorrectly, they can be really hard to break and also restructure,” Jessup shares as he sits down with Your Investment Property magazine editor Sarah Megginson for the latest YIP Talk podcast.
Jessup spotlights what investors should be focusing on when it comes to laying the foundations for a profitable investment, and he says that ownership structure is an integral part of your overall strategy to wealth creation – no matter how many properties sweep your portfolio.
“Once you’re in [a certain structure], you can’t really change it. It’s really difficult to change ownership. You have to sell the property and it comes with the many more complications,” Jessup says, also guiding readers across the different structures and how it can determine the amount of tax they will be required to pay.
In certain instances, and depending on your circumstances and the property structure you buy within, “you can have a lot more money to invest into the next property or development or subdivision, [or] whatever you decide to do”, Jessup explains in the podcast.
For those who have plans in the pipeline to purchase a property, the director says that they should be planning up to six months in advance.
Jessup says: “When you’re actually ready to hit the market and buy a property, once you’ve done your research, done your education, you’re 100% ready to go and you don’t miss out on an ideal opportunity.”
Also, with borrowers now having to jump through higher hoops in order to secure loan approval, how loan structures and affordability essentially work is being fleshed out more than ever before.
Jessup likens the current property climate to being “a big funnel of opportunities”.
“[Investors] really need to be looking for what specific they need for their plan. It comes down to your age, it comes down to what you need, what your income needs…so having some education and having a plan of attack is definitely how they’re going to be set up in 2020,” Jessup explains.
To find out more about how to be prepared for when you set out to purchase your first or next investment property, tune in to Wayne Jessup’s full interview on the YIP Talk podcast.