Buying as an investment
If you can’t afford your dream home in your preferred suburb, think outside the square and consider making your first property purchase an investment property
Taking that first step on the property ladder as an investor rather than a home buyer can involve a change of plans. But don’t dismiss the idea altogether. It’s a strategy that can offer real pluses.
First home investors guide
Aussie’s Property Investor Guide brings together plenty of information about buying a rental investment. So it’s definitely worth a look.
In the meantime, let’s check out some of the main points you need to be aware of when you take that first step on the property ladder as an investor.
Tax perks shouldn’t be the sole basis of selecting an investment. But the fact is, property investors have the potential to tap into some very useful tax benefits.
These include the ability to claim a tax deduction for some of the costs of owning a rental property; the availability of capital gains tax discounts when you sell the place further down the track; and the prospect of trimming your tax bill though negative gearing. This is something worth a closer look.
Negative gearing refers to the situation where the rent you receive from your investment property is less than the costs of owning the place. This creates a loss, which can often be claimed on tax. That way, you could potentially enjoy tax savings on your regular wage or salary – money that can help to cover the ongoing expenses of your rental property.
Can I still get the FHOG if I purchase an investment?
The First Home Owner Grant is only available for an owner occupied home – not an investment property. However, in some states, such as New South Wales, you only need to live in the property for at least six continuous months before you can rent it out.
Property management and tenants
As an investor you can choose to manage your rental property – and the tenants – yourself. This means taking on responsibility for a number of important tasks including advertising the place to let, screening tenants, lodging the rental bond with the appropriate agency, collecting rent and keeping the property well-maintained.
If you don’t have the time (or interest) to manage the property yourself you can use a professional property manager.
You can expect to pay for the support of a professional manager, and the cost varies between agencies and areas. Along with a monthly management fee based on a percentage of the rent, you may also be charged for additional services such as finding a new tenant or renewing the lease.
Rent where you want to live, buy where you can afford
Part of the appeal of buying as an investor is that you’re not limited to suburbs that suit your personal needs or preferences. You have more freedom to widen the scope of your search to areas that appeal to tenants – not just you.
But it begs the question, where will you live?
The answer can lie in rentvesting – renting out your investment property, while you rent a place in your preferred suburb.
If you think rentvesting could be right for you, take a close look at your budget to be sure you can manage the ongoing costs of owning your investment property and also rent. Remember, your rental property may experience vacancies from time to time. And you could face higher rents yourself. The main point is to do the math to be confident that rentvesting is the right move for you.
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Take the next step to buying your first home
- Chapter One : Getting started
- Chapter Two : Your dream home
- Chapter Three : Money matters
- Chapter Four : Ways to purchase
- Chapter Five : Understanding interest rates
- Chapter Six : Understanding home loans
- Chapter Seven : Lending sources
- Chapter Eight : Getting your loan
- Chapter Nine : Choosing a home
- Chapter Ten : Steps to settlement