Currently over 1.8 million Australians own an investment property and one of the main reasons is for the tax benefits they provide! An investment property is a real estate property which is purchased for the purpose of earning an income through the property in a range of ways which may include through renters or through resale of the property in the future.
Buying a commercial or residential property as an investment property is an exciting time – although to make the most of it it is important to understand the ins and outs of an investment property to make the most of tax benefits and other benefits available.
Benefits Of Making Investments In Properties
There are many benefits of investment properties with the main benefit being tax related. Many property-related expenses are tax deductible, which may include maintenance costs or fees paid on your residential or commercial loans.
Some key benefits of investment properties include:
– Rental Income
– Capital growth
– Tax advantages
– Negative Gearing
Having rental income from your tenants is a great way to ensure you have a regular income which is beneficial for cashflow. Landlords can claim a variety of costs including property maintenance costs, council rates, pest control, garden maintenance, agent fees, strata fees, land tax, advertising costs to find a tenant and more.
The main tax benefits and advantages which come with owning an investment property which is a rental property is that you can offset any losses on the rental property against your assessable income. It is possible to pay less tax overtime if the income you receive from the property is less than the expenses associated with owning the property as these costs will be deducted from the owner’s income.
Negative gearing is something to take into consideration when you have an investment property. Negative gearing refers to when the income from the property is less than the rental return, interest, or other related property costs. This can reduce your overall taxable income, meaning that you are reducing the amount of tax you may need to pay – overall saving money in the long run.
Claiming for depreciation on a negatively geared property can result in an improved tax position. This is due to when you claim for depreciation this can increase the overall loss of the investment property which can then be claimed as a tax deduction against personal income. Due to this, there will be a decrease in the investors tax liability and lead to a higher tax refund.
Reach out to the friendly team at Greenline Home Loans who can assist you with commercial property loans, accessing the best home loans, or a construction loan where the real estate property can then be used as an investment property for you to reap the benefits for.
Top 3 Mistakes To Avoid When Investing In Properties
To get the most out of your investment property it is best to understand your goals and financial situation. Here are some tips for 3 mistakes to avoid when considering an investment property:
1. Not conducting enough research
It is important to carry out sufficient research before acquiring a loan or buying a property which you are intending on becoming an investment property. It is important to research the location of the property you are wanting, the possible zoning requirements in the area you are interested in, the needs and requirements of possible tenants for your property, the condition of the property and more.
Ensuring you have undertaken sufficient research will ensure that you are well-informed about the property you are building or buying and are able to make the decisions based on factual evidence.
2. Not having a plan or strategy in place
It is always beneficial to have a plan or strategy in place regarding your investment property. Real estate can appreciate in value, although time is needed for this to happen. Generally, the longer you are in the market, the higher your capital gains will be. Therefore, it is important to set a plan for if you are planning to invest long-term.
3. Not calculating finances effectively
It is important to ensure the property you are building, or buying is a good financial decision for you long-term. Ensuring you can afford the payments required and maintenance costs by setting aside money or creating an emergency fund can limit financial hardship which may occur.
Speak to the friendly team at Greenline Home Loans who are able to assist with commercial property loans, the best home loans available or construction loans to begin with when you are considering an investment property.
Reach out to Greenline Home Loans today!
If you have been considering buying your first home, buying a residential property or wanting an interest-only residential home loan, get in touch with our team of experienced brokers at Greenline Home Loans. We have access to 50 lenders and a strong relationship with several major banks to assist you and offer a solution to suit your needs.
At Greenline Home Loans, we will tailor the best solution for your needs and walk with you hand in hand from the first day you consider a construction loan or small business loan. Contact our friendly team of brokers to speak about low-rate home loans on 1800 705 505 to get started today!
Have you recently been looking into the best home loans or commercial property loans for a possible investment property? Are you wanting to learn more about positive gearing and negative gearing and the effect this can have on your finances and properties? The team at Greenline Home Loans can help!
This article will help you understand what gearing is, the features of positive gearing and negative gearing, the benefits of both and tips to keep in mind to get the most out of your investment property.
What Is Gearing?
Gearing refers to when you borrow money to invest and is most commonly referred to when speaking about investment properties. Positive and negative gearing refers to when somebody buys a property, often an investment property, which is then rented out or brings in a form of income. Both positive and negative gearing strategies can have benefits and drawbacks, making it important to consider which best suits you, your personal circumstance including your income, debts, and financial position as well as your risk preferences.
What is Depreciation?
The depreciation of a property refers to natural wear and tear over time of a building’s structure and assets, which property investors can claim as tax deductions in each financial year. Depreciation is often linked to both positive and negative gearing as both depreciation and capital allowances are legitimate tax deductions which can be claimed.
The main benefit of depreciation for a property which is positively geared is the reduction in the amount of tax payable. When you claim for depreciation on a property, the profit you make on the property will be lower meaning less tax will be payable.
The main benefit of deprecation for a property that is negatively geared is an improved tax position. For a property which is negatively geared, when you claim for depreciation this can increase the overall loss of the investment property which can then be claimed as a tax deduction against personal income. As a result of this process, there will be a decrease in the investors tax liability which leads to a higher tax refund.
Whether your property is positively or negatively geared, there are several benefits of utilising a depreciation schedule. Reach out to the friendly team at Greenline Home Loans today to find out more!
Understanding Negative Gearing And Its Benefits
When the income from the property is less than the rental return, interest, or other related property costs, this is referred to as negative gearing.
The main benefit of negative gearing is that any net rental income you may lose throughout the year may be offset against your salary or other income you may earn over the financial year. When this happens, it reduces your taxable income and how much tax you will need to pay. Overall, if you have a reduced taxable income, this could save you money in the long run.
There are several other benefits of negative gearing which may include:
- Capital growth over time generally means the investment property should increase in market value
- An overall reduction in tax liability
- Having a regular income through the tenants
It is important to keep risks in mind when considering negative gearing such as ongoing ownership costs, initial purchase costs and the responsibilities tied with becoming a landlord. Reach out to the team at Greenline Home Loans who can assist you with covering which risks you are willing to take, the best strategy and how your personal circumstances and financial situation relate to applying for commercial property loans or a home loan.
Understanding Positive Gearing And Its Benefits
When the income from the property is more than the rental return, interest, or other related property costs, this is referred to as positive gearing.
If you are making more money in comparison to your net rental income and other property related expenses, this can leave you with more money in your pocket which is often used to ensure that loan repayments are met, although it can be saved to assist with paying for external things.
One thing to keep in mind regarding positive gearing is that your net rental income can be subjected to tax, which may impact the overall increase over time. It is important to consider your strategy and long-term goals when deciding on an investment property, which is why the team at Greenline Home Loans are here to help!
Consider Your Risks With Positive And Negative Gearing
It is important to consider your risks with positive and negative gearing strategies. In relation to negative gearing, it is recommended to choose your investment property carefully, you have a suitable income for the repayments you are required to make and for any property-related expenses and to consider any insurance you may require.
Reach out to the friendly team at Greenline Home Loans who will be able to assist with the best home loans and commercial property loans for an investment property. The team will be able answer any questions you may have about positive and negative gearing strategies and which route is the best to take for your needs, personal circumstances, financial situation, and preferences!
Reach out to Greenline Home Loans today!
If you have been considering buying your first home and are looking for the best home loans, buying a residential property, wanting an interest-only residential home loan or are investigating commercial property loans, get in touch with our team of experienced brokers at Greenline Home Loans. We have access to 50 lenders and a strong relationship with several major banks to assist you and offer a solution to suit your needs.
At Greenline Home Loans, we will tailor the best solution for your needs and walk with you hand in hand from the first day you consider a construction loan or small business loan. Contact our friendly team of brokers to speak about low-rate home loans on 1800 705 505 to get started today!