Investment tips: Increasing equity and renovating

71Buying residential property is a popular option for Australians looking to secure an interest in the property market as investors.

Properties in major centres such as Sydney, Perth and Melbourne have been hot commodities lately, while dwelling values on a national level increased by 2.8 per cent in 2013’s final quarter.

Once you’ve bought a property, have you thought about how you might increase its equity?

Understanding equity

Equity is an asset’s value, less the amount of money that’s owed on it.

When you first take out a property loan, the principal is the amount you’ll owe, with interest added on top of this.

The greater your deposit, the lower your principal will be – driving up your home equity.

From this point, it’s important to make regular repayments that help reduce the amount you owe, thereby increasing your equity.

Check the terms of your loan

Though you’ll need keep up with maintenance costs, the higher your rental income, the more you’ll have to pay off a loan on the property.

However, make sure you check the terms of a property loan before signing on the dotted line. Sometimes you can get stung with fees if you make additional repayments or pay the loan off early.

By knowing in advance what your obligations are, you’ll be able to plan ahead so you can pay off the loan as quickly as possible, to increase the property’s equity.

Renovate

Renovating your investment property can help increase the chance of getting better tenants and higher rental incomes.

It may also increase the resale value, which is the kind of news that pleases property investors.

Renovations may be as simple as giving the place a fresh lick of paint, or could be more substantial.

An extra bedroom or a new kitchen fitout may increase the property’s worth, but be sure to consider how long renovations will take, as you could miss out on significant rental income.

Leave a Reply

Your email address will not be published. Required fields are marked *