Your Investment Property
A successful investment property means quality tenants attracted by your property's access to services, ease to maintain and good fittings. If you don't intend to live in the property, look at it with "investment eyes" only.
Here are some more buying tips:
Research the property and the area
- Research the capital growth history of the area and the potential rental income of the property. The local real estate agents are a good place to start.
- If it's been rented before, check the tenant record.
- It's important to invest in an area with rental appeal e.g. close to schools, shops, transport, or close to parks and beaches.
Do your inspections
Get your building and pest inspections done. It will cost a little, but if you find problems it will save you a lot of money, and headaches, in the long run.
Understand the contract
Your solicitor or conveyancer should read the Contract of Sale. Are you happy with what's included in the sale? Are all the fittings included? Ask as many questions as you need to feel comfortable. And make sure it's all written in the agreement.
Why invest in property?
Capital growth
One of the main reasons to invest in property is for capital growth. Yes, you'll pay capital gains on the increased value of the property when you sell, but the tax benefits along the way can be quite significant.
Rental income returns
The rental market may change over the years, but generally, property is a reliable investment. Whenever your property is being rented, you're receiving an income.
Positive vs negative gearing
Keep in mind that the interest and related expenses you incur (such as repairs and maintenance) are tax deductible. Negative gearing means your loan repayments, fees and other costs exceed your rental income. This means that the net loss can be offset against other income you earn, so you will be able to reduce the amount of tax payable on your other income.
Positive gearing, on the other hand, is where the annual rental income received from the property is higher than the annual loan repayments and costs. The benefit here is that you earn extra income, but of course this is taxable.
Make sure you factor in the capital gains tax you will have to pay if you decide to sell the property. Be sure to consult your taxation advisor.
Things to consider
Once you have decided that investing in property is right for you, the next step is choosing your investment property loan. TIO has a range of repayment options and products to suit you, whether it's your first property or you are expanding your portfolio.
Repayment options
Interest only repayments
Interest only repayments allow you to reduce your regular loan commitments. It is important to remember this option only covers the interest on your loan and does not reduce the principal of your loan. TIO offers a maximum interest only period of five years. Consider your investment strategy for the property prior to deciding on this option.
Interest in Advance repayments
This option offers a convenient way to consolidate interest repayments into a lump sum in order to gain tax benefits sooner. Twelve months of interest must be paid in advance, prior to 30 June each year and this option is only available with fixed rate loans.
Principal and Interest repayments
This option allows you to pay off your property loan as soon as possible. Again, consider your overall investment strategy prior to deciding on a repayment option as this will help you decide on the best option for your needs.
Protecting your investment
The best way to protect your investment is to insure your property. You should take out contents and building insurance from the moment you sign the contract. You will be expected to have home building insurance if you have a mortgage over the property as it covers damages and losses to the building.
TIO is the Territory's largest insurer, and we have a range of products to suit your needs. We even have a dedicated landlord insurance product.