What should I know if I already own a property?
Releasing equity in your home to finance an investment property is a great way of getting your current home working for you.
There’s a growing trend among young people to buy a home, pay off part of the loan and borrow against their equity to finance the deposit on an investment property.
What else should I know with investment loans?
- The rental income from your new investment adds to your existing income, which means you don’t have to earn a huge salary to begin investing
- You’ll need to get yourself a property manager that will find a tenant, collect the rent and manage repairs. You can also choose to do it all yourself, but be prepared, as managing property can be very time consuming.
- Research the capital growth history of the area and the potential rental income of the property. Choose areas with recreational, shopping and transport facilities and over time the value of your investment will grow. If it has been rented before, check the tenant record. If the property has a high turnover, find out why.
- Negative gearing is used to reduce your income tax liability through the expense of running an investment property. It comes into play on the money borrowed for an investment when the expenses associated with the asset are greater than the income it generates.
- When selling an investment property, if the value of this property has increased, you will more likely have to pay capital gains tax on the difference. This amount will then be added to your regular income and you’ll be taxed at your marginal tax rate.