Property

Investment Property

While we all like to count on any property purchase being an investment, technically an investment property is a real estate asset that has been acquired solely with the intention of earning a return on the investment, through rental income and/or future resale.

Investing in property can be a long or short term strategy, depending on the property characteristics and the market demand. It is important to understand the characteristics of an investment property as the financing solution is very different to that of a family home.

For many, investing in property provides more of an ‘exact science’, the numbers are more transparent, logical and manageable and there seems less potential risk in achieving a return. Put simply, as long as the rental income is consistent and covers expenses, even if the property doesn’t grow in value, you will have someone else paying off your loan for you, and there is the return.

Another key benefit of property investment is the potential tax deductions it can attract,
such as management and maintenance costs like;

  • advertising for tenants
  • body corporate fees and charges
  • council rates
  • water charges
  • land tax
  • gardening and lawn mowing
  • pest control
  • insurance (building, contents, public liability)
  • interest expenses
  • property agent's fees and commission
  • repairs and maintenance
  • some legal expenses
  • travel undertaken to inspect the property, to collect the rent or for maintenance. (source: www.ato.gov.au)

In some instances, the expense of owning your investment property exceeds the rental income it attracts, which means it is referred to as negatively geared. The advantage of this gearing is that the loss can be used against your main salary to reduce the income tax payable.

With the set and forget nature of property investment, i.e. it looks after itself, rental income paying the debt incurred, equity continues to grow which can then in turn be used for further purchases.

To get you started check out Is an investment property right for me?

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