Why is an investment property a good strategy?
Basically because it is as safe as bricks and mortor. People feel safe with an investment they can see and check up on. Property offers an income and potential for capital growth and as an investment there may also be tax concessions. An investment in property is not difficult to understand, we live in houses and know that it is an asset that others will need to use, it is a need not a want and hence an easily understood asset.
What about negative gearing?
Negative gearing is a tax minimisation strategy where you have a net tax loss due to receiving less rental income from your investment property than the costs of maintaining that property. This net tax loss is offset against your salary income, so you pay less tax on your income. Thus, whilst your property is generally increasing in value over time, you are reducing your taxable income.
What about capital gains tax?
When selling an asset, the profit is subject to capital gains tax. There are some exemptions, such as your primary residence or motor vehicle. However, when selling an investment property, if the value on this property has increased, you will 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. Your holding entity and how long you own the property will also have an impact.
Do Mortgage Brokers charge for their services?
You will deal with many professionals in your real estate purchase and ongoing management. These include: the real estate agent, the buyers agent, the solicitor, the building inspector, the pest inspector, the accountant, the strata manager, the rental manager and your financial planner are paid for the services they provide. In most instances mortgage brokers are also compensated through facilitating an introduction to a lender and assisting the client – that’s you, in the ongoing maintenance of their loan.
However some professional mortgage brokers who specialise in offering more do charge, however you get more. In addition to assessing your current loan requirements they will look at your future financial needs and looks at your goals and the path to achieving those by making sure your current loan structure works with your long term strategy not just your short term needs. Many find that when they get their tax done or they go to buy subsequent properties that the structure either prevents them from making a purchase, creates many issues or that they can not claim the tax deductions they thought they could. Getting your structure set up correctly is imperative.
In addition some mortgage brokers also offer extra resources, assistance and the benefit of their experience. You will find that the mortgage brokers who are in high demand, and who offer additional services and benefits for their clients will also charge an engagement fee or fee for their advice.
At ICM we have a number of packages that may suit you. They vary and although one offers a gift of the engagement fee back at settlement, others offer additional resources for a fee. The choice of what you want is up to you, we just want to give you the opportunity to get the right loan to allow you to buy the right property at the right price and we have many tools and resources to assist you.
This quick video explains the packages and what extras you will get that you may not with a bank branch or other mortgage broker.