How to make your investment property work for you
Thinking about delving into the world of property development in and around Perth? Even if you have zero experience, there’s no need to be worried about making a wrong move - remember, even the most successful property investors started where you are now.
To make property investment seem less scary, it’s a good idea to take the time to first understand how profits are made, then look into the different ways you can maximise profits.
Making a profit
There are two ways to make a profit:
Now you know how your investment property can make you a profit, let’s look into some ways to save you money along the way.
There are three main tax benefits that make Australia a positive environment for property investment.
Capital Gains Tax (CGT)
This is a tax on profit from the sale of an investment. If you sell an investment property (that you’ve had for more than one year), it can help reduce the amount of tax you pay.
Your property’s home, fixtures and fittings will decline in value over the years, meaning you can potentially claim back that amount in tax.
In property, ‘gearing’ refers to taking out a loan to purchase a property. ‘Negative gearing’ therefore means your rental income is not as much as your interest repayments, resulting in a loss. This can be of benefit to you if the money you make from your property’s capital growth over time is greater than the loss you make in rental shortfall.
Owning a property classified as an investment property allows you to claim a tax deduction on your loan interest (the property’s negatively geared component) or the shortfall between the rent you receive and the loan repayments plus any associated costs (e.g., rates, strata, repairs and item replacements). These tax deductions help to reduce the amount of personal income tax you need to pay, which frees up your cash flow. To find out how to take advantage of your investment property at tax time, you should always speak to your financial advisor or tax specialist as they can help you with your individual circumstances.
Getting good tenants
When renting out your investment property, good tenants will help ensure long-term maintenance of your investment, as well as regular, reliable payments. We recommend hiring a good property manager, who can help you find the right tenant, conduct reference checks and make sure they pay their rent on time.
Tapping into your equity
Equity is the difference between what your investment property is worth and how much you owe on it (e.g., if your property is worth $450,000, and you owe $100,000 on the loan, then you have $350,000 of equity). With the right strategies in place, you can tap into your equity in a way that allows you to maximise your investment property profits.
Summit Projects – expert land developers throughout Perth
When it comes to successful property investments, talk to the experts in Perth development, Summit Projects. The Summit development sales consultants know how to get the most out of your block, especially strata developments (Perth).
Call Summit Projects today to discuss your property development in and around Perth using Summit’s property development calculator.
*This blog is meant to provide general advice only. Please speak to a financial advisor or planner in regards to your individual circumstances.
Disclaimer: The information within this article is general information only and it does not constitute advice or recommendation. It does not take into account your financial situation, investment objectives or personal circumstances. Before making a decision about developing your property, you should seek independent financial, legal and taxation advice.