One of the most interesting evolutions weve witnessed in the property market recently is the rise of investing renters. Its becoming increasingly popular for people to purchase their first home, rent it out and remain tenants themselves. If you think about it, investing while you continue to rent makes sense. Here are a few reasons why.
Start your property portfolio while continuing to live where you want to
Weve noticed that there has been an increase in the number of people who buy properties but dont live in them because of lifestyle factors. These people may love being close to the CBD and while they can afford to purchase a house, they cant buy into these sought-after inner-city locations. So they buy a house in an outer suburb and rent it out while they rent in the area where they want to live. This situation would typically happen because the home they are renting is more expensive than they could afford if they were to buy something similar, explains Greg Fistonich from Custom Financial Solutions. Perhaps they have plans to move or have had a change in their lives. Its always a good time to buy an investment property simply because youre investing for your future. Regardless of current lifestyle choices, we all need to be thinking about our wealth-creation plans.
Take advantage of negative gearing
Youve probably heard the term negative gearing used before when discussing investment properties. Negative gearing occurs when a person borrows money to purchase an investment property but the accrued interest and combined running costs add up to more than the income generated by the property. When these costs are more than the rental income, the Australian Taxation Office will let you offset the loss against your income. Negative gearing makes property investment more financially feasible, and it helps people purchase and hold onto properties so their investment grows over time.
Make the most of tax deductions
There are a number of investment propertyrelated expenses that can be claimed as tax deductions. These include interest payments, rates, strata fees, pest control, maintenance costs and advertising for tenants. You cant claim these deductions if you are living in the property.
Get advice first
There is a real possibility that you can own a property with no or low out-of-pocket expenses, says Greg. The most important thing is to talk to a financial adviser or mortgage broker to discuss your goals and work out a budget to get an idea of what you can afford. All it takes is a quick ten-minute phone interview to get an idea of what you can borrow, the price range you can buy in and what your repayment commitments will be.
With interest rates at historically low levels and a property market that is favouring buyers, now may be an ideal time to investigate your buying options. Our partner, Custom Financial Solutions, can provide all the information you need to make an informed choice. Book your quick and easy phone interview with Marg Kudla by phoning (08) 9315 9343 or email.