Many Australians choose to invest in property because of its proven ability to provide steady returns and capital growth. Further advantages include ongoing income through property rental, and potential taxation benefits.

Importantly, an investment property should be viewed just like any other investment. There are essentially two reasons to purchase an investment property; to build wealth over time, or to obtain an ongoing income. Property caters for both of these needs.

It is important to look at purchasing an investment property with an objective view. You will need to take into account the sort of factors which you would not normally contemplate when buying a house to live in. Some of these include:

Purpose. What is your predominant goal, to generate an income or capital growth?

Type of Property. Residential property is the most common type of property to invest in. Other property investment options also include commercial or industrial sites

Appearance. A common error made by property investors is to choose a house that they have an emotional response to.

Location. Look at a location that will give the best possible returns.

Ongoing Expenses. Consider repairs and maintenance, do you want an older or newer property? Do you prefer a unit, villa or townhouse as an option? Will there be management fees?

Depreciation. This is an important financial issue when looking into an investment property

Gearing. How should the property be geared? (Personal benefits regarding negative or positive gearing should be discussed with your accountant).

Gearing is borrowing money for the purposes of investment.

Negative gearing is basically when the income from the rental property fails to cover the expenses on the investment.
By being negatively geared you can gain tax benefits as you are able to deduct the costs of owning an investment property from your overall income. The biggest part of this deduction is the interest portion of your mortgage, but you can also claim such expenses as property management fees, loan costs and repairs.

One investment strategy is to borrow funds or use the equity in your existing home to purchase an investment property. Whilst achieving long term capital growth, this also provides ongoing rent and taxation benefits. Investors often use the equity in an existing property to fund an investment strategy. Using the equity in an existing property allows you to increase your overall investment potential.

To fnd out more, contact us and talk to one of our friendly Brokers or to send an enquiry.