Considering an investment home? Historically an investment property has always increased in value over time. So if you can manage to service a loan from the rental income and perhaps a small cash injection then you will make money when the property gains in value. Generally once you have a deposit you will not need a huge income to get started.
As a property investor you will have two types of returns the first is from the income that the property generates through rental returns and deductions from taxation. The second is from the capital gains that the property makes over time. The longer you hold the property the better the chance of a good capital gain.
THE TAX BENEFITS OF OWNING AN INVESTMENT PROPERTY
When you buy an investment home in Australia you will be able to claim all expenses that are related to generating a rental income from the property. This includes the interest payments on your loan and depreciation expenses related to the property. You will also be able to claim things such as, advertising expenses, council rates and land tax, repairs and maintenance and land lord insurance. You may also be able to claim some office expenses. You will need to consult with your tax adviser for details.
Negative gearing refers to the situation when the cost of owning the property is not covered by the rental income that is generated by that property. This loss can be deducted from your taxable income such as wages. However you still make a loss as you will only save the tax portion of every dollar claimed. Hopefully over the longer term these losses will be reduced by increases in rent and the capital gain that is made from the property overtime.
The time will come when you choose to sell your investment property and hopefully you will make a capital gain. Well this capital gain is taxable the profit is added to your income in the year that the sale is made. There are important tax concession available to property investors, talk to your accountant for advice.
FREE EBOOK INVESTING IN PROPERTY ESSENTIAL THINGS TO CONSIDER
USING YOUR EXISTING EQUITY TO BUY AN INVESTMENT HOME
Most people use the equity in their existing home to buy an investment home. Equity in your home is the difference in the value of your home and what you owe on it. Keep in mind that the banks will normally not lend on the full amount of equity available. Normally they will lend up to 80% of the value of your home less what you owe.
Interested in learning more, want to retire financially secure, contact us for further information.
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