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Investing in property to pave your way to financial freedom is never going to be an exact science, and with the potential for great rewards you must accept that there will also be some big risks involved. In fact, being aware of the risks and doing your due diligence and own research on how to minimise them is the best way to guarantee success as a property investor.
A good place to start is to know exactly what NOT to do, so here are 5 common errors property investors should avoid.
Failing to plan
The property market is always fluctuating, so risks are inevitable. The best thing you can do is be financially, mentally and emotionally prepared for the absolute worst to happen.
When property investors fail to plan, they plan to fail; so plan for interest rates to go up, and plan for the times when you don’t have a tenant. Planning is all about bringing the potential future into the present, so that you can do something about it right now.
Making uninformed emotional decisions
Have you ever known whether to expect a tax bill or a refund at the end of the financial year? No? It’s ok, you are not alone. But here’s the fact: if you knew your real-time tax position all year round, you would probably pay a lot less tax!
Not knowing your tax position puts you at risk of making emotional decisions, rather than calculated and logical decisions. Emotional decision makers are much more likely to over-capitalise on a purchase, rather than negotiating the best possible price and outcome for their investment goals.
Sticking to the budget is key, and investors must be prepared to walk away from a property they love if the numbers don’t stack up. By knowing where you stand, you could make informed decisions that benefit you at tax time, and stay on track to achieving your property investment goals. Cloud-based tax software like TaxTank can provide property investors with interactive reports and real-time data to ensure the right opportunities are never missed!
Misplacing important documents
Do you have difficulty providing your accountant with the information they need in order to do their job and help you out? The document management struggles can get pretty serious for property investors! You’d save a lot of time and money if sharing documents with your accountant was quick and easy.
Instead of trying to keep faded receipts and random invoices in an old shoe box, smart property investors are moving to the cloud. TaxTank is a safe and secure cloud-based space to keep your records and documents organised.
Making incorrect claims
90% of the rental property claim audits recently conducted by the ATO had errors. As a result of the massive $3.3 billion gap found between rental property deductions and reported incomes, the ATO is cracking down on unsupported and ineligible property investment claims.
One of the most common misunderstandings between property investors and the ATO is incorrect interest claims. If you refinance part of your investment loan for private purposes, you will not be eligible to claim interest on the entire sum of the loan. It’s also essential that investors apportion deductions for holiday homes when they are not genuinely available for rent, as well as classifying your capital works correctly, rather than try to claim deductions for repairs and maintenance.
You’re probably familiar with that lingering uncertainty around tax time. You could be doing a great job, but on the other hand you could be making really expensive mistakes. Wouldn’t it be nice to just know what you can and can’t claim, and stop living in fear of the ATO?
Viewing tax as a once-a-year event
If you dread tax time every year and just want to pay the least tax possible, it’s time you met TaxTank. To tell you the truth, tax should not be a once-a-year event – especially if you’re a property investor! TaxTank has a special tank just for property investors that lets you easily see your financial position all year round, and make informed decisions to stay in control how much tax you pay.
The solution is finally here!
Can you imagine having instant access to all of your paperwork, your income and expenses, cash position, growth forecasts and property statistics – all in one place? TaxTank has some very cool digital software that’s all about making life easier for property investors. Designed by specialist accountants and highly experienced property investors, TaxTank is finally here to end your tax anxiety once and for all!
Sign up for a free 14-day trial, and see how you can be free from property investment errors for life!