Guide to Property Investing in the Northern Territory
Money makes the world go round, or so the old adage goes. Whether you believe in that notion or not is up to you, but if you're looking to make a bit of cash either on the side or as a main enterprise, the property market is a sure-fire way to help your money grow.
It's a reliable, stable option that promises growth year after year, and it's an industry that's never going to die. That's because people will always need a roof over their heads, and it's this solid fact that makes property investment in the Northern Territory a tempting proposition.
Even so, it can be difficult to know where to begin. The property market can seem an impenetrable maze of contracts, fees and red tape, but it's really not that bad - especially if you enlist the help of LJ Hooker. We've built a wealth of experience and know-how when it comes to property investment over the years, so read on to find out more.
Different types of property in the Northern Territory
When buying an investment property in the Northern Territory, there are two distinct ways of operating:
Positive cashflow property
This refers to when the rental income made from your property is greater than the costs of running the place - home loan and all. the property will be running at a profit, with a good rental yield
That said, when values rise, rental yields often contract. This can make it hard to establish positive cashflow in the long run.
Negatively geared property
This term is largely the opposite of positive cashflow, as the property works at a loss. That's because the interest on the home loan exceeds how much it makes in rent. Though this may seem a poor way to make money, negatively geared property can be beneficial, as it carries benefits in the form of tax deductions, making it a popular choice among investors looking to make the most the most of capital gains. The short term loss is, over time, mitigated by the tax reductions, resulting in long-term gain.
This method remains popular in the Northern Territory, largely because house values continue to rise rapidly. However, your own investment strategy depends largely on your personal income. At LJ Hooker, our team is always available to help gain a firmer understanding of these concepts, and give advice on how bet to move forward with your NT property investment.
Financing a Northern Territory property
There are a multitude of ways to get started in property investment in the Northern Territory. Even if it's your first time buying a home, you're not counted out of getting involved in the investment game. There are just certain criteria that you'll have to meet as a first-time buyer, such as ensuring that you live in your new home for at least six months within the first year of ownership. This way, first-time owners will still be eligible for the First Home Owner Grant (FHOG), a little something to help initial buyers onto the ladder.
A popular way to invest in Northern Territory property is to leverage equity from a home you already own.To put it simply, equity represents the difference between the value of your home, and how much of your mortgage you have left to pay. This money can be accessed by refinancing your current home, and then using it for capital towards your next purchase. One of the main benefits of employing this method is that you don't have to save for a deposit, which can take a considerable length of time.
Should you need to borrow a few dollars to help you invest in Northern Territory property, LJ Hooker can lend you a helping hand. By getting in touch with our home loan experts, you'll learn about an extensive array of options at your disposal. Additionally, you'll benefit from our low rates and fees, and a raft of other perks, such as free unlimited extra repayments and redraws, and up to four loan splits.
When you're looking to borrow money purely with the intention of investing, it's a good idea to take a look at the pros and cons of the idea. Do your homework by reading up on this informative section of the MoneySmart website, where you can weigh up the risks, as well as the rewards and make sure you talk to your financial advisor or accountant as they will offer you the best advice for your situation.
Finding the right Northern Territory investment property
As your search for investment property in the Northern Territory begins, you'll realise (if you've done it before) that the entire process isn't vastly different from when you bought your first house.
That said, there are distinct parts of the process that you may not have come across before. For example, it's possible that you didn't know that median value growth and rental yield represent capital gains and cash flow respectively. Both are well worth keeping in mind when formulating your investment strategy. To get a little help with your calculations, head on over to the CoreLogic RP Data and SQM Research website.
It doesn't matter if you've bought property in the Northern Territory or Australia before - it's still important that you do your research when looking for an investment property. In our experience, you'll need to enlist the help of a financial planner, solicitor, mortgage broker and buyer's agent. This is to ensure that the entire purchasing process goes through as smoothly as possible.
To help you find a solicitor, the Law Society Northern Territory is a fine resource. All Financial Services Northern Territory will help you find someone to assist you regarding financial matters. If you're deadly serious about finding and paying for a lucrative Northern Territory investment property, making sure that you have a dream team in place is key to making it happen!
Investment property taxes
When buying an investment property in the Northern Territory, it's important to budget for the fees and taxes that you'll incur. Firstly, you'll need to work out how much you'll owe, and you can do this by visiting the Territory Revenue Office. Stamp duty and land tax are two of the most obvious costs that you'll have to foot, and if you aren't a first-time buyer, you will not be eligible for the exemptions and benefits that come with this status.
Stamp duty is based purely on the value of your home, so it's important that you use the state's stamp duty calculator to work out just what you'll owe when you buy. For example, if your investment costs $300,000 or more, or is an existing home, stamp duty will cost $10,414.30. Be sure to use the state's stamp duty calculator to figure out what you'll owe.
Unlike every other state in Australia, you will not have to pay land tax in the Northern Territory.
You should also remember that an investment home loan is more likely to have a higher interest rate than it will be for owner-occupiers. Therefore, it makes good sense to use a comparison website to find the most suitable deal out there.
Several costs that come with running a Northern Territory investment property can be mitigated via tax breaks. This includes property management fees, repairs, legal issues, and mortgage fees. The Australian Taxation Office has a full list of the tax deductions that can be applied for when buying a rental property in the Northern Territory.
Managing a Northern Territory investment property
Do it yourself, or use an agent?
As soon as you have signed all the contracts, got your finance sorted out and can officially call your new home yours, you need to work out how you are going to manage the place. Many people relish the challenge of becoming a landlord, which can often be a full-time job in itself. It's completely up to you what you do with your investment, but why not a look at employing a property managing agency?
The experienced, professional team that make up LJ Hooker's property management department will take care of the day-to-day running of a rental house, allowing you to enjoy the profits that it brings in. There are several reasons why using a property management company makes sense - and be sure to get in touch with us once we've made up your mind!
Even if you decide to go it alone, be sure to have a read of Your Investment Property's guide to your rights and responsibilities that come with being a landlord. No proverbial stone is left unturned - you'll learn all about the rules and regulations regarding rent and bond, as well as what to do about repairs, utilities, service charges and visitation rights - everything the new landlord needs to know.
As soon as you've evaluated your options, such as the sheer amount of time your investment might take up with ongoing maintenance, you may well decide that you want to leave the hard work to us - which is when it's time to get in touch with LJ Hooker.
What to ask a property manager
There are several things that you should ask a property agent before allowing them to take over your investment. That's because your property will represent a big part of your income, and should be treated accordingly. Here are a few to think about.
- How many properties do they manage?
- Do they do repairs themselves?
- How do they screen and select tenants for a rental property?
- Have they been to the Civil and Administrative Tribunal before? If so, why?
- What are the agent's fees?
- Will you be able to remain in regular contact with the agent?
In general, there will be an initial fee of between one and four weeks rent set by a property manager, with an ongoing percentage of monthly rent to be paid thereafter - normally 5 to 10 per cent.
From a rental property management perspective, you can rest assured that our team will take care of everything, from the serious legal side of things, through to selecting suitable tenants through our foolproof screening process. This will help avoid any unnecessary scenarios, such as an unreliable tenant that fails to pay the rent getting chosen. At LJ Hooker, we list a rental property every half-a-minute or so, illustrating just how well-regarded LJ Hooker is when it comes to property management.
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.