Invest in a real FinancialPlus
Here’s some good news – house price trends show that a home is potentially a great way to build wealth! Now that’s what we’d call a great investment! If you’re planning to invest – either with some experience under your belt, or starting out – FinancialPlus can help you understand what you need to know about finance. We also have access to great accounting advice. So let’s get started.
How hard is it get investment finance?
Right now it is harder than ever before but that doesn’t mean it’s impossible and with FinancialPlus on your side, we can take the pain out of it for you. The regulators have cracked down on investment lending but we know who does it well and who doesn’t.
Where should I buy?
The simple answer is: buy where the market takes you, not where your emotions want to go. If your investment property is attractive to you because you’d love to live there, that’s not necessarily a good reason to buy. If it’s attractive to you because it’s located in one of your favourite areas of town, that’s also a not a reason to buy. We don’t like to comment too much on where people want to buy as that is not where our expertise lies but we sometimes work with people that can help in this area.
Treat it as a business
An investment property isn’t a personal matter at all; it’s a business transaction. That’s the first key to investment success. Your tastes are your tastes and they will filter into the decision making, but remember, you’re not going to live there. So think of your market, research their needs and what similar properties are offering. Think about amenities. Is it close to schools, supermarkets, shopping malls, parks and transport? Is it a competitive property someone in your market will be prepared to rent? Those (and plenty more) are the questions you need to ask. Save the personal ones for your own home.
Can I use my superannuation fund?
What a super idea! Self-managed super fund (SMSF) loans are available if you wish to invest your superannuation in property. On the good side, SMSF loans can offer some real tax benefits. On the bad side, they’ve got more red tape than a harbour bridge opening ceremony. Remember, your super is a major part of your future security. If you’re going to invest it in property, make very sure it’s the right property. FinancialPlus can refer you to experts in these fields who know all the do’s and don’ts and we can certainly help you with the right finance for your needs. So do talk to us before you make any decisions.
If you’d like to chat about your investment property options, call us on 07 5564 5903 or contact us.
What’s negatively geared?
Well, it’s not a car with five reverse gears! Negative gearing is where the cost of owning an investment exceeds the income it provides. With property that means tax deductible expenses and interest costs exceed rent received. As a result, the investor with a negatively geared property can usually reduce their personal taxable income and the total amount of tax they pay by the loss that the property is showing.
What’s positive gearing?
Basically it’s the opposite. Investment property income received is greater than the costs of the investment. As a result, there’s a net income and that’s deemed to be taxable.
Which is best?
That’s a very good question and we sure haven’t got room to debate all the answers here! On paper you’d say negative gearing gives you the more positive result – less tax payable, but it’s simply not that straightforward. The best way to work out whether your investment property should be negatively or positively geared is to sit down with your accountant and work this out. Naturally your personal and business circumstances will determine which is right for you and your investment profitability.
Depreciate your assets
Yes, good old depreciation can be your best friend in an investment property. Depreciation is best described as general wear and tear of an asset. Your investment property is an asset, but so is all the stuff in it – refrigerator, oven, air conditioning and so on. Going further than that, apartment complex common areas – gymnasium, swimming pools, water tanks – are also subject to depreciation.
So how can depreciation work for me?
Simple. Well, fairly simple if you know what you’re doing. Depreciation on all assets can be shown as investment property expenses even if you’re not physically paying for it; in the eyes of the tax man, it is. It therefore reduces your profit or increases your loss. Either way, you could pay a lot less tax. You will need to get a depreciation schedule completed once you buy a property.
Does the age of a property affect depreciation?
It sure does. It’s like a new car. The moment you drive it out of the car yard, you can almost hear the value falling out of it. Property is the same. Depreciation reduces over time, so if you buy a brand new investment property, you’ll have depreciation coming out your ears and making that tax bill shrivel away! If you buy a much older property, your depreciation will still be useful, but nothing like as spectacular.
Will I pay land tax?
Maybe, but only if your total land value exceeds the threshold stipulated by your state government – they vary, so check it out. If you’re buying a single property, you shouldn’t have any problems with land tax. If you’re buying more than one, that’s more the time to start checking for any land tax creeping up behind you.
If you’d like to chat about your investment lending options, call us on 07 5564 5903 or make an enquiry.