Negative gearing allows people to borrow money to purchase an income producing property. A rental property is negatively geared when purchased with the assistance of borrowed funds and if the net rental income is less than the interest of the borrowing after deducting other expenses.
Investors can benefit from tax deductions and claim many other expenses associated with owning a rental property, including loan interest. The benefit is you only have to contribute a minimal amount of money from your own pocket as the tax rebates you receive, along with your rental income are used to pay off your loan. The long-term goal is for taxman and your tenants to pay off most of the costs associated with your property and once the property has increased in value significantly, you can sell and earn a substantial profit.
Negatively geared investments is the first step for most investors as the sizeable tax deductions mean it is by far the most affordable type of investment, often enabling you to purchase multiple properties for a low up-front and ongoing cost.
You should always aim to minimise your ‘out of pocket’ expenses and maximise your potential for capital growth when investing in property. Reasons why property investments fail to benefit the investor include:
Purchasing off the plan means buying prior to construction. Benefits include:
The buyers 10% deposit is help in a legislated trust account, and it is law that it cannot be used by the developer until the property is complete. The is advantageous for the buyer as it allows up to 12 months to organise financial matters.
Yes. Foreign persons are able to invest in brand new or off the plan property. Approval must first be given by the Australian Government.
Yes, you are able to send your funds anywhere in the world.
This situation is quite common. Many overseas investors utalise property managers to look after their property and ensure everything is looked after. However it is important to note that as a landlord, you will still have a number of responsibilities. It is therefore important to stay connected via email, phone and internet.
Property managers help maximise your return on investment through the following services:
Yes. Generally non-Australian residents are able to borrow up to 80% of the purchase price for Australian dollar loans. Keep in mind, when purchasing a property off the plan you only start repaying your loan after the build is completed and settlement takes place.
Foreign currency loans are available for residents of certain countries however buyers must be aware that there is a currency risk if borrowing a different currency to the asset.
Property on Sale guarantees that all properties offered for sale through our company are offered at exactly the same price offered in Australia to local investors. You pay no extra as a buyer from overseas. All prices are fixed. There are no hidden costs. All prices are fair market prices.
While Australian residents are able to consider purchasing established homes, legally overseas investors cannot. Often established properties do not have attractive extras such as structural guarantees, security systems, off street parking, swimming pools and the like. For this reason it is important to consider what tenants are after at the time you purchase. Further, 60% of a new residential property investment will be tax deductable.
It is important to note that prime locations result in higher capital growth, but rental yields are often lower. Property located in areas away from cities generally provide higher rental yield, but less capital growth. With this in mind, you should also consider your personal circumstances before you purchase a property.
Property investment in Australia is not complicated, but you should always seek advice from experience property agents.
While Australia has one of the most consistent property markets in the world, there are always risks associated with property investment. Such risks can include falling house prices, rising interest rates, tenanting problems and damage to the structural integrity of the house, but these risks can always be mitigated and managed.
It’s normal for interest rates to fluctuate from time to time. When taking out a loan you have the option of staying on at a lower variable rate of interest or paying a slightly higher interest rate and having it fixed for up to five years. Higher interest rates often result in extra tax deductions, thus reducing the impact.
If you borrow between 70-80 per cent of the total purchase price on an Australian dollar investment load, then in most cases the rent will cover the mortgage repayments.
The rise in property prices depends on the demand. Influences such as improvements to infrastructure, shopping centres, public transport, population growth and migration help create demand. At the moment Australia faces a critical shortage of new housing, which means purchasing an investment property should see healthy capital growth.
ROI is a performance measure used to evaluate the efficiency of a particular investment. ROI is calculated when the benefit or return of an investment is divided by the cost- the result is expressed as a percentage.
It depends where you are looking to purchase. For example, your $700,000 property in an affluent suburb may sit in the middle of the market for that area, but a $400,000 property in a rural area may be considered a mansion. However, if you were to purchase a $400,000 property in the affluent suburb, which would sit at the mid to lower end of the market, you would most likely achieve higher rental yield resulting in better cash flow. There is more flexibility when selling a lower priced property than a large one, and selling a property in the mid to lower end of the market will most likely attract investors and first home buyers, therefore increasing your potential purchasers.
Generally people put an investment property on the same shelf as their own home and only think of the interest bill. But you should remember that after you have tenants and receive your tax benefits, sometimes what’s left over is as little as $100 a month, which will only become less over time as the rent increases each year.
You have to remember that only a very small percentage of the population can afford to invest in property and more than 30% of the population are currently renting. There will always be a demand for rental properties in Australia due to population and migration forecasts and trends, however the supply and demand for rental properties is cyclic and vacancies occur from time to time. To help reduce the risk of vacancy, you should make sure you research the location of your property and always keep the property well-maintained.
When buying a brand new house and land package you will only pay stamp duty on the value of the land, not the entire price of the home. Savings also apply to those buying off the plan properties. First homebuyers in Australia may also be eligible for Stamp Duty savings.
Many people think that it is best to invest in city centres and the CBD of a city, but in reality, most Australians want to live outside of the city. Purchasing ‘student’ housing and serviced apartments is also often a risky investment.
Basically, you should look for a property that Australian tenants would want to rent. Australian buying behaviour is vastly different to overseas markets so it is important you do your research. It’s also important to look for something that will be relatively easy to resell. Further, you should seek the assistance of a reputable property manager and aim to hold on to your property for at least 10 years.
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