There are many benefits in purchasing an investment property. The possibility of gaining rental income, the expectation of the property's value may grow, and also the tax reduction you may receive from negative gearing.
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Difference between Positive and Negative Gearing
Positive Gearing is the ideal position to be in as an investor. This is when your rental income covers your loan repayments and/or any other expenses that you may incur.
An investor should be aware of the possibility of Negative Gearing. Negative Gearing is where the return from the rental income is insufficient to meet the costs of the investment.
This may lead towards the reduction in assessable income for taxation purposes.
The benefit of Negative Gearing is that it enables you to associate your costs involved with your investment against your tax.
Please note: this information should be used as a guide only. This is not intended to be investment advice. For advice, please speak with a professional tax advisor.
- The interest calculated on the loan associated with the investment property.
- Any loan set-up fees i.e. stamp duty, mortgage insurance, loan application fees, and valuations.
- Traveling expenses you may incur from maintenance inspections i.e. airfares and petrol.
- Building maintenance and repairs.
- Expenses i.e. water & council rates.
Elements to Consider
There are several issues to consider before purchasing an investment property.
- Gain information about the area.
- Does the area attract tenants?
- What is the growth rate of the area?
- Facilities in the area? i.e. shopping centers, medical centers, schools and public transport.
- Living conditions i.e. heavy traffic conditions, aircraft, industrial areas.
- What are the rental returns within the area?
- Landlord Insurance should be considered in the case of unpaid rental payments or damage to property.
- Knowing your tenants.
- Most real estate agents can provide you with information about the history of tenants(s).
- Try to gain a long lease (e.g. 12 - 18 months)
- Choose a real estate agent that offers property management services to your satisfaction.
- Ensure you have enough money to cover expenses in the cases of delay time between tenants.
Please note: Information that is contained on the web site should be used as a guideline only. You should seek advice from professional financial, legal and real estate specialists before purchasing a property and/or applying for a loan.