INVESTOR
Whether it is your first investment property or you are well on your way to constructing a big property empire it is the best idea to take a look at what home loan options are available to you in the market. We can give you complete assistance for your investment and structure your loan to meet your needs.
- Deposit Funding
- Fixed Rate or Interest Only
- Loan Structures
- Self-Managed Super Fund (SMSF) Loans
Need assistance? Just contact us and we will help!
In Focus
Investment Property Tax Deductions
When you invest in a property there a various number of factors that you may be able to claim as tax deductions.
From a loan perspective, you may be able to claim the interest you pay each month across the financial year. It is for this reason that interest only loans are popular for investors as repaying the principal component is not tax deductible.
Investors will also have a depreciation report done on their investment property that will show what tax deductions can be made each year. If you were just watching The Block you would have seen they made a big point of this and used the depreciation schedule available (particularly from all the furnishings) as a selling point for the properties. Companies such as BMT can put these schedules together for you.
As a complete guide the following pointers may be claimed as tax deductions for an investment property:
- Interest on the investment loan
- Home and contents insurance and landlord insurance
- Real estate agent’s commission
- Maintenance costs
- Council rates
- Decline in value of depreciating items such as fixtures & fittings
You must talk with your accountant on the specific items relevant for your circumstances.
Loan Types
Mostly investors will look at the following types of loans however as with all home loans, there are various options available to you. Please discuss these options with your broker to get the loan that will be suitable for your requirements.
1
Interest Only Loan
As its name suggests, this type of loans is where you are only paying the interest on the principal amount each month. The principal amount of the loan remains unchanged. An investor frequently uses such loan as it permits you to minimise your mortgage repayments in short-term and you can get a tax deduction on interest payments made but not principal repayments.
2
Fixed Rate Loan
A fixed rate loan is where the interest rate is locked in and does not change for the period of the loan term. Loan terms are typically for a period of 1-5 years. An investor may choose this loan type to ensure their repayments remain the same each month.
3
Line of Credit
A line of credit enables you to draw on funds as you need them up to an approved credit limit. Your minimum monthly payment is the interest charged on the outstanding balance each month. If you already have a line of credit on a current property, it is possible to use any equity from that property as a deposit in your investment property.
4
SMSF Loan
If you have a self-managed super fund (SMSF) you may be able to purchase an investment property through your fund. As these are quite complex loans it is best to talk to your broker on the best approach for you.
Ask a Broker
As an investor you will be looking for different things from your loan to someone who is buying a house a live in. For instance you will no doubt be looking for the most tax effective solution!
Here are some questions to think about when you chat to a broker.
- Can I use the equity from my home as a deposit?
- Is a line of credit the best way to access this equity?
- Should I think about cross-collateralisation?
- What loan types are suitable?
- Should I get an interest only loan?
- What benefits are lenders offering to investors?
- Will my interest rate be higher than an owner-occupier loan?
- Should I look at a fixed rate?
- What fees are applicable on the loan?
- How can I set the loan up to minimise interest paid?
- Are there any loan restrictions on particular suburbs or apartment buildings I should be aware of?
- What LVR will a lender allow for an investment loan?
- Can I use an SMSF loan for my property purchase
- What are the eligibility criteria for an investment loan?
Ask yourself
It’s also important to ask yourself some questions so you are prepared. This will help your broker find the right investment loan structure for your needs.
- Are you looking to buy one property...or is this the start....or continuation of an investment portfolio?
- If you have more than one property do you want them all to be financed with the same lender?
- How long are you planning on keeping the property for?
- Do you need an offset account or the ability to redraw any additional repayments made?
- Are you looking to purchase your property through an SMSF?
- Have you already found an investment property?
- If interest rates increase do you have the capacity to make the loan repayments?
- Do you know the potential rental returns on your proposed investment property?
- Have you factored in strata costs or other expenses that may be incurred?
- If your investment property is untenanted for a length of time could you afford the repayments?
- Are you buying the property in your own name or using a company or trust structure?
Need assistance? Just contact us and we will help!