Should your first property be an investment property?
If you are taking the first step towards building your property portfolio, there are a few things you should know. Investing in property has significantly grown in popularity in recent times, potentially appealing due to its tangibility and accessibility for most. If you are taking the first step towards building your property portfolio, there are a few things you should know.
Making the most of grants
If you are buying property for the first time, you may be eligible to the First Home Owner grant, which can have a big impact on budget. Grants of up to $10,000 are available, but there are a few limitations that you need to be aware of. Firstly, the property must be your primary place of residence for at least 12 months from settlement, and you can’t have previously owned a home on your own or jointly. In addition, the property purchase must be under $750,000 in order to receive the grant. If you are buying your first property as an investment, you should carefully weigh up the case to consciously miss out on the grant. Noting that it is an option to convert your first purchase into an investment property after the qualifying period has subsided (12 months) and therefore have a kick start on your portfolio by making the most of the grant.
Understanding the costs
The appeal of an investment property for many is the surety of a consistent income through collected rent. In simple terms, with a consistent rental income that covers expenses, regardless of growth in value, your tenant is paying off your loan for you, and there is the return. Importantly, some of the costs involved are tax deductible, such as: – Tenancy advertising – Body corporate fees – Council rates – Garden and building maintenance – Insurance – Interest expenses In some situations, the rental income is less than the expense, which means the investment is negatively geared. This type of gearing can be used to offset your main income for tax benefits. Making the most of grants, or generating income and equity in an investment property, both have pros and cons to consider, and there isn’t one rule for everyone. To discover a situation to suit your individual needs you should speak to a finance specialist before you make a decision.