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How should I create a plan for my investment property?

I am toying with the idea of buying a rental property as I cannot afford to buy a property where I want to live and I have been shifted to the country with my job. I thought I would try to buy a two-bedroom unit in a great area where I would love to live when I return to Sydney. Do you think I should go to an accountant or a financial planner to create the plan for this investment property?

I think your idea is a great one provided you have the income to justify the loans required and that the tax deductions related to the property will help your overall position.

In a perfect world, you would talk through your ideas with your accountant who would be able to marry your income and current liabilities in with your potential tax deductions. That’s what an accountant is qualified to do and so for that limited advice, that might be all you need to do.

However, if you want to create a plan that might cover the next five to 10 years, then it might be wise to have a talk to a financial planner. It worries me that so many Australians go into the really important financial decision of buying the most expensive asset they will ever buy without an objective analysis of what can go right or go wrong. Too many people take ‘advice’ from real estate agents, bankers and mortgage brokers who can be good at what they do but they’re not commissioned with the responsibility of making sure you’re totally up to making your payments and ensuring you meet all of the other goals that you might have. Sure the banker wants to do a reasonable check on whether you can meet your payments but he doesn’t ask about plans to marry, plans for overseas trips, plans to change jobs, plans to send kids to private schools and whether buying a home is really the best investment decision for you. That’s where a good financial planner really holds his or her own.

However, you do have to be careful that the planner steers you away from property because they can’t do much for you when you buy a property. Some advisers will put you into shares because you end up dependent on them for advice, so be careful of those types. On the other hand, being too exposed to property can also be unwise. In your case, it would be your first property, so it should not be an issue.

One last warning – make sure your job is secure if you’re going into a long-term debt play and think about what happens if you got sick. You might need some insurance. These are the sorts of questions a good adviser will get you to think about.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Tuesday, May 17, 2011

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