Buying property as an investment can be your first step up the property ladder
If you want to get into the property market, but can’t afford to live in your dream suburb, an option you can consider is purchasing an investment property and renting it out. While it can involve a change in strategy from buying a house to live in, it’s a strategy that can offer real advantages.
Aussie has a dedicated Property Investor Guide that brings together information about buying a rental investment in one place. If you’re considering this option, 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 want to become a property investor.
Tax perks shouldn’t be the only reason you choose to buy an investment property. But the fact is, property investors have the potential to tap into some very useful tax benefits.
If you own an investment property, you can;
If the rent you receive from your investment property is less than the costs of owning the place, then you own it at a loss. This is called ‘negative gearing’. The opposite of this, ‘positive gearing’, is when you make more money from rent than it costs to own the property.
The loss you suffer from negative gearing can be deducted from your regular wage or salary to reduce your taxable income (and therefore lower your tax bill) — saving you some money that can help cover the ongoing expenses of your rental property.
No. The First Home Owner Grant is only available for an owner occupied home — not an investment property. However, in some states like NSW, you only need to live in the property for six continuous months before you can rent it out.
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;
If you don’t have the time or interest to manage the property yourself, you can use a professional property manager. The cost of hiring one is different between agencies and locations. They usually charge you a monthly management fee based on a percentage of the rent, but you may also be charged for additional services, like finding a new tenant or renewing the lease.
When you buy as an investor, you aren’t limited to suburbs that suit your personal needs or preferences. You’re free to widen the scope of your search to areas that appeal to tenants.
But if you’re renting out your place, where will you live?
The answer might be ‘rentvesting’: renting out your investment property, while you rent a place where you actually want to live.
If you think rentvesting could be right for you, make sure you look closely at your budget. You’ll have to manage the ongoing costs of owning your investment property and pay your own rent as well. Consider factors such as how you will cover costs if your rental property sits vacant for weeks, and whether your investment’s rental income will be enough to offset your rent.