Guide to Property Investing in New South Wales


All you need to know if investing in NSW

Different types of property investment in New South Wales

When you buy a NSW investment property, there are two main ways you can set it up:

Positive cashflow property

This is a situation where the rental income you make from the investment property is greater than the costs of running the home (including home loan and maintenance costs). Essentially, the property runs at a profit, with a healthy rental yield (income expressed as a percentage of the property's total value).

However, when values rise, rental yields contract, and it can be more difficult to establish positive cashflow investment property in New South Wales.

Negatively geared property

Negative gearing is the opposite of positive cashflow, wherein a property runs at a loss as the interest on the home loan exceeds the rental income. This carries benefits in the form of tax deductions, and is popular among investors that are making the most of capital gains. It allows them to manage investment property at a short term loss mitigated by tax breaks, but produces long term gain.

Negative gearing has been popular in New South Wales as values have risen so quickly, however your own investment strategy is going to depend entirely on your income. The team at LJ Hooker home loans is on hand to help you understand these concepts and provide advice on the best way forward for your NSW investment.

Financing a NSW property investment

Typically, an investment home loan will be slightly more costly than an owner-occupier regular fixed or variable mortgage. While the difference between these mortgages from the same lender can be as negligible as 0.2 per cent, it can add up to thousands of dollars in the long run.

Using professionals like LJ Hooker home loans can help you discern what likely repayments will be on an investment home loan, and supply a wide variety of mortgage options. Also, consider that since the Australian Prudential and Regulatory Authority tightened conditions on investment lending in 2015, your loan value ratio may cap at 80 per cent, and depending on your lender, even at 70 per cent. This increases the risk of having to pay lenders mortgage insurance to secure NSW investment property.

Finding the right New South Wales investment property

Securing an investment property in NSW can be difficult with such a crowded market, but the use of the right professionals and research facilities can make this easier.

  • CoreLogic RP Data, and are good for market trends, including value increases and lending trends.
  • SQM Research has a database for vacancy rates, identifying where tenant demand is strong and weak.
  • LJ Hooker's real estate agents have intimate market knowledge, alerting you to investment properties that fit your profile and financial strategy.

You are not just finding a property for your tastes, but also one that fits your long term financial strategy. This introduces considerations that will require the help of property professionals.

Investment property taxes

If you are buying for investment in NSW, you will have to remember certain duties and taxes.

There is transfer duty, which the Office of State Revenue (OSR) provides a handy resource for. Transfer duty costs $40,090 for homes that are over a million dollars, plus $5.50 for every $100 that it exceeds the million dollar mark.

With NSW investment property, you also have to pay land tax if it is valued at more than $482,000, which is $100 plus 1.6 per cent of a home's value up to the premium threshold of $2.947 million. The OSR also has a number of sample land tax calculations that can be useful.

You will also have legal fees, mortgage costs, valuations and inspections to take care of, which can cost thousands of dollars - our buying property in NSW page has more details on this.

Tax benefits

Many costs of running a NSW investment property can be offset through further tax deductions. This includes property management fees, repair costs, petrol, legal issues, mortgage fees and even paying a gardener to landscape the outdoor area. The Australian Taxation Office has a full list of the tax deductions that can be made when you own rental property.

Managing a New South Wales investment property

Do it yourself, or use an agent?

One of the biggest differences for NSW investment property is that you will be renting it out. You can manage this yourself, or use a property management service like the one available at LJ Hooker.

Being a landlord gives you full hands-on management of your NSW investment property and saves you agent fees, but entails a great deal of legal knowledge. You must understand how to conduct tenancy law, bond lodgment, tenant screening, ongoing repairs and engaging the NSW Civil and Administrative Tribunal. You will also have to live in proximity to the NSW investment property.

Using a property management service incurs some costs, but means that every aspect of the investment is managed by real estate professionals who have done this before. LJ Hooker's property management team has extensive experience managing all manner of investment properties right across NSW.

What to ask a property manager

There are many important questions to ask a property agent before they manage your rental - this is your investment and income source, and as such must be managed appropriately.
  • How many properties do they manage, and how long have they been doing it?
  • Do they do repairs themselves or use a contractor? Are they qualified for significant repairs, such as electricity or plumbing fixes?
  • How do they screen and select tenants for a rental property?
  • How do they resolve rental arrears? Have they been to the Civil and Administrative Tribunal before? Why, and what were the results?
  • What are the agent's fees, and what services does this cover?
  • Will you be able to remain in regular contact with the agent?

In general, there is an initial fee of anywhere between one and four weeks rent set by a property manager, with an ongoing percentage of monthly rent paid thereafter, normally 5 to 10 per cent. These should be clarified in your initial talks with a potential property manager.

LJ Hooker's property management team is on hand to answer any questions you have about running an investment property, whether you want to do it yourself or hire a professional.

The advice provided on this website is general advice only. It has been prepared without taking into account your personal objectives, financial situation or needs. While every care has been taken to ensure the accuracy of the information it contains, neither the publishers, authors nor their employees, can be held liable for inaccuracies, errors or omission. Readers are advised to contact their financial adviser, broker or accountant before making any investment decisions and should not rely on this article as a substitute for professional advice. This information is to be used as a guide only and is subject to change at any time. All information is current as at publication release and the publishers take no responsibility for any factors that may change thereafter.

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