5 Concepts to Understand Before Buying an Investment Property

5 concepts you should fully understand before establishing the type of investment property you want to put your money into.

Becoming a property investor is a life goal many Australians reach for, it’s also a status symbol for those who love a little property talk around the barbecue. The right investment property can set you up to establish positive cashflow and eventually financial security in retirement, but to reach your status, you need to have a carefully considered strategy. 

Firstly, you must consider your goal when buying an investment property, with 5 concepts you should fully understand before establishing the type of investment you want to put your money into: 

  1. Cashflow – Rental payments from your tenants provide the cash flow income for your property, which can be used to help meet the loan repayments and other expenses of the property, but rent is only one component of your overall investment return. 
  2. Capital Growth – This is where the property value goes up in line with the general property market and history tells us that well located properties will on average, double in value around every 10 years. 
  3. Value Addition – Active appreciation – This is where you add value to your property through either buying at below market value or by renovating and adding more overall value than the cost of the renovation. 
  4.  Negative gearing – Negative Gearing is where the costs of owning and managing an investment property exceeds the rental income received, with the loss claimable as a tax deduction on your taxable income. 
  5.  Positive gearing – Positive Gearing is where the investment property gains more in rental income than the costs of owning the property, becoming a profitable and taxable income stream for the investor.  

 Like anything to do with earning income in Australia… the tax man will need to be considered when planning for your investment. Understanding how income is added or deducted is a really important component in deciding what type of property you want to purchase and how it can work to your benefit.  

We are proud to be home to a highly skilled team of mortgage and finance brokers who specialise in investment lending. Bernie Lewis Home Loans have access to a large and diverse range of lending options, which enables us to provide solutions to all walks of life. To chat about your investment lending goals, simply call 08 8300 8300 or click contact us today. 

Investment Property