The key to good property investment, and lower risks, is getting the right loan and guidance. Investing smartly in property can provide you with good tax-friendly returns and security.
How MediPro Can Help You
Planning on investing
Investing in property has long been the Australian way and is a great way to build long- term wealth. You also don’t need to be rich to get started.
There is no right or wrong time to invest in property. It is all about your needs, your goals and your current situation. Your MediPro Specialist can help you answer a few of the below questions that you will be wondering about:
- What is my current financial position?
- Can I afford a rental property?
- Am I prepared to hold onto the property for a while?
- Can I afford the upfront costs?
- How much can I afford to borrow?
- Do I need a deposit, and if so, how much?
- Discuss your current situation and needs
- Compare all options from over 30 lenders
- Determine if refinancing is right for you
- Negotiate a great deal for you
- Complete the application forms
- Package and lodge your application
- Liaise with the lender
- Give you good advice
- Do your legwork and paperwork
- Ensure your old and new lenders sort everything out
- Take care of any issues that may arise
Tax and Gearing
If you are choosing an investment strategy, it is important your investment property loan gives you the maximum tax benefits possible. As always, there are negatives and positives to all options, so it’s important that you speak to your MediPro Specialist in order to make sense of all the ins and outs.
Here are a few questions that you may already be asking yourself:
Your property is negatively geared when the mortgage and other costs like maintenance, fees, rates and more, is more than your rental income. That means you will be making a loss on the property, and that loss can then be offset against your income to reduce your tax bill.
You would use negative gearing to help you pay for your property. Your tenant pays rent and a large portion of the mortgage, and the loss will come off your taxable income, also helping to pay off your property. It is always a good thing to hold on to your property for a long time, as ideally the property will increase in value in that time, and give you a helping hand.
Positive gearing is when your rental income is more than your mortgage interest payment and costs of the property. Therefore you’re making a profit on the property, and that profit can help you repay your loan sooner.
A buildings capital works has a value, as well as fixtures and fittings. Each of these items depreciate by a certain percentage each year, and this value can be a big tax advantage to a property investor. Specialist companies or your accountant can inspect your property and work out the value of these items for you, to make sure you get all the deductions that you are entitled to.
Capital gains tax is a tax on the difference between the selling price and the purchase price of an item or property. It includes legal fees, stamp duty and other upfront costs. It can be very complex so make sure you talk to your accountant.
Land tax is an annual tax based on land value only and is tax deductible on any income-producing property.
There is no GST on interest and mortgage repayments, bank charges or council and water rates. Also, GST doesn’t apply to residential property rental income, so investors can’t claim it for general property expenses.
Using Equity to Purchase an Investment Property
You may not need a deposit to buy your investment property if you own a home already. You may be able to use your home equity as security for your next property. There are a few reasons you might consider using your equity, rather than saving up for a deposit:
If the value of your home has gone up significantly since you purchased it, or you have paid off your mortgage significantly or totally, you could be in possession of a fair bit of equity. Rather than put yourself under the added pressure of saving up a deposit, you can make use of this money sitting in your home.
If your deposit is less than 20% of the property value, lenders will usually charge LMI. As an investor, you can access up to 80% of your home equity, which may cover part or all of the deposit needed to circumvent LMI. So you could pay less, or no insurance, saving you thousands.
On an investment property, all interest is tax deductible. So in the event that you already have a home loan, it is often best to borrow the full value of the investment property with an interest only loan. Talk to your MediPro Specialist about how to achieve this.