Investment Property can be a great way to build wealth because the bank lends you the money, you receive a legal tax deduction and your tenant pays the loan.
The bank lends you the money
Banks and lending institutions look at residential property as one of the most secure assets to lend money against. This means that the process of borrowing money to invest in residential property can be easier than it is for other asset classes such as individual shares or share portfolios.
If you are looking at a standard residential dwelling in an approved city or suburb you can borrow up to 100% of the value of the property if you have enough equity in another property.
If you have a cash deposit they may lend you up to 95% of the value of the property.
Your bank loan can also cover costs such as stamp duty, legal fees, loan application fees and miscellaneous costs.
You can claim tax deductions for any loses you incur on your investment property. You can receive your tax deduction, monthly, fortnightly or even weekly.
Your tenant is paying off your loan
Your tenant pays rent each month to live in your property. You then use this to pay towards the loan costs.
Here is an example illustrating these three ideas.
- You purchase a new property valued at $500,000
- Your bank lends you $525,000 covering the purchase of the property, stamp duty, legal fees, loan application fees and other costs.
- Your income is $80,000
- You receive $500 a week in rent
- After all expenses are paid and depreciation is take into account you receive a tax deduction of $95 per week.
- This means you only need to find $48 each week to own a property valued at $500,000.
Choosing an investment property is a smart way to build wealth because the bank lends you the money, you receive a tax deduction and your tenant pays the loan. If you would like to know more about this topic or you would like to suggest a topic for us to write about then please contact email@example.com