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  1. #1
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    Default Tell me about your investment property?

    My husband and I are looking at buying an investment property towards the end of the year.

    Do you have an investment property?

    Tell me the things I need to know - (this is my first point of call, so I know absolutely nothing)

    We currently pay a lot of tax, so we are hoping to be able to use the investment to reduce our tax bill each year.

    Any help/tips would be greatly appreciated.

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    My one tip would be to make sure you actually understand what negative gearing is. If your rental expenses exceed your rental income (ie. a net loss)then yes, your taxable income will be reduced by that amount and your tax liability reduced accordingly. So say you have a $10000 loss on your rental property and your marginal tax rate is 30% you would reduce your tax by $3000. Still a net loss of $7000 overall that you need to factor in to your budget. If you end up with good capital growth that is well worth it but is not of course guaranteed. So when you are ready to buy, base your decision more on what aspects of the property make it a good investment (location, potential growth, low maintenance, rental yields and demand) rather than the possible tax deduction it will give you.

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  4. #3
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    Do your research on areas to invest in. We bought a house in a cr*p area and it hasn't increased in value in the last 7 years. If I had my time again I would get a flat close to town in a good area with good growth. Think of proximity to public transport etc. Our place needs a lot of work so we are always forking out money which is good because it's a deduction but I would rather the money in my pocket!
    Think about apartment blocks that have extra fees with body corporate, maintenance etc!

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    Default Tell me about your investment property?

    Yes as pp said I would talk to your accountant first, negative gearing is a little misunderstood as you do get tax breaks but are still out of pocket every year so need to factor in the added costs

    do a budget , add in your estimated mortgage repayments plus council rates, water rates, insurances, extra bank and accounting fees, agents fees , maintenance , strata rates, have a month or two mortgage payments saved in case of vacancies then minus your estimated net weekly rent and that's what you should have extra every week to pay

    Start researching the suburbs you want to invest in, check the capital growth, vacancy rates, average rental returns and start finding a great real estate agent to manage your investment

    Then start looking into the best finance and loans you can get and don't forget to factor in your stamp duty, mortgage insurance and solicitors fees when you buy

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    Some excellent advice here!

    I have one, I built a house and then moved so just rented it out. It used to be negatively geared but not anymore. I know that when you build you can claim depreciation which helps. At the moment I don't make much profit or much loss, and I don't really have to think about it.

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    What area are you thinking of investing in?

  8. #7
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    What elijahs mum said.

    I would personally buy something that needs work so that you can increase the value of the property by doing a reno and also then depreciate the new items to get more tax back.

    I would think capital growth first and then anything you get back in your tax as a bonus. Don't rely on negative gearing to make you much money, it really doesn't. It's when you come to sell it that you will make money if you buy wisely.

    Also be realistic about what rent you will get. Get an independent rental agent to give a rental valuation, not the rental agent attached to the agency selling the house. The last thing you want is to have your house on the market for ages waiting to get a certain amount of rent that you'll never get if it's over quoted.

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    Definitely look for something you can add value to - whether that be cosmetic work to increase rental return, extending, adding a granny flat (we did this, it was very worthwhile and the property is now profitable 5 years after purchasing it, even though we charge below market rent in order to retain our awesome tenants).

    It depends what kind of a project you're willing to take on, but I'd look at things like dodgy areas next to nicer areas, existing and proposed transport links, neighborhood development proposals or plans, housing commission auctions, anything old and run-down (but do your due diligence!).


 

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