Investors Tips

Why invest in property

There are a number of great reasons to invest in property.  If you have not purchased a property before you may be unaware of the benefits of owning property, we have listed below a few of the key benefits;

Negative gearing – Tax Advantages

When the cost of owning an investment property is more than the income it earns, you can negatively gear and receive tax benefits. Talk with your accountant to see how this can work for you.

It’s popular with investors as you can deduct the non capital cost of owning a property from your overall income. The largest amount is normally the interest, however, you can also claim other costs such as repairs and management fees.

It is important to note the benefits of negative gearing only kick in when the property is rented and is generating an income.

Depreciation – More Tax Advantages

New home buyers get the most benefit from Depreciation, however Existing properties can also offer significant Depreciation benefits as well.  Basically this is an accounting formula approved by the Tax Office to write-down the capital value of your property over a specific timeframe. 

Please ask your accountant to provide more information, but general information is available from the Australian Tax Office (ATO).  We have attached a guide issued by the ATO that we found quite useful (ATO Depreciation Guide 2009).

Capital growth

One of the main reasons to invest in property is for capital growth. Yes, you’ll pay capital gains on the increased value of the property when you sell, but the tax benefits along the way can be quite significant. Remember, your principle place of residence – your home is tax free*.

* The taxation position described is a general statement and should only be used as a guide. It does not constitute tax advice and is based on current tax laws and their interpretation.

Rental income returns

The rental market may change over the years, but generally, property is a reliable investment. Whenever your property is being rented, you’re receiving an income.

Use your equity

If you already own your own home (or another property) you can use the equity in that property to help finance your investment. You may be able to lend a significant proportion of the value of your existing property’s value.  These loans can be used as security or as a deposit in certain circumstances.

It is important to remember, when borrowing more than 80% of the property value you need mortgage insurance.  This is very expensive and can dramatically reduce the investment return received from a property.