Property is most often regarded as a long-term investment. That’s because of the time and costs involved in selling property. However, you can also invest in property through a managed fund, which will give you more liquidity.
|Buying an investment property|
Making the right choice for you will involve research and understanding some fundamentals.
You should follow the tips outlined in buying a home and remember that you are buying an investment, not a home to live in. Emotion should play no part in your decision.
If you buy the right property at the right price, you may experience capital growth and good returns. However, the reverse is also true. While every property is different, the following are some things to consider:
|Being a landlord|
There are responsibilities to being a landlord, but then maintaining the property in good order is in your interest. Properties left in poor condition usually return smaller rents, may not attract good tenants and in the long run are more difficult to sell at a premium price. While the legislation governing rental properties can vary between each state and territory, these are some of the basics you may be required to do:
While you have the right to regular inspections of your property, these must be done with respect to the privacy of the tenant and in accordance with the legislation. Generally you will need to make an appointment and there is a limit to the number of inspections you can make in any 12 month period.
In return, the tenants have a number of responsibilities, which include:
Gearing is borrowing to invest. Negative gearing is generally when the costs of holding the investment outweigh the ongoing return.
For example: You have an investment property with tenants paying $500 per week ($26,000 a year), but your repayments on the home loan and other costs such as rates, maintenance and agents fees are $36,000 a year. So you are making a loss of $10,000. However, the costs associated with maintaining an investment property are often tax deductible. This means you may be able to claim a tax deduction for these costs incurred.
Another reason why people are prepared to make this loss is in the hope that the property itself will appreciate and, in time, they will sell and make a capital gain (less any capital gains tax which may apply).
You can also negatively gear other investments such as a share portfolio. However, you should never invest on the basis of a tax advantage alone. The investment itself must be sound.
In general, you may pay a higher interest rate for investment loans than a residential home loan. However, depending on your circumstances, this may not be the case.
You may be able to access the equity in your existing property to fund the investment. Or you could simply use your home as security for the investment.
If you choose to roll the two loans (home and investment) into one, you should make sure it doesn't negatively impact your interest rate or your tax position. Make sure you still have the flexibility you need to make the loan repayments and live your life.
Depending on your circumstances, you may decide to choose between an interest only, interest plus principle, fixed or variable rate loan.
|How we can help|
At ANZ, we understand that every investor’s circumstances differ, from those investing in residential property for the first time, to experienced investors seeking to extend their established portfolio. We can help guide you through the process of achieving your investment goals.
1. Money magazine Home Lender of the Year Award 2010, 2008, 2007, 2006 and 2005, and AFR Smart Investor Magazine Home Lender of the Year Award 2005, 2004, 2002, 2001, 2000 and 1999. Australian Lending Awards, Mortgage Lender of the Year 2011 and Best Investor Lender 2011. The Australian Lending Awards is an independent initiative of The Adviser and specialist research and advisory firm RFI.
2. ANZ Home Insurance and ANZ Landlord Insurance is co-issued by OnePath General Insurance Pty Limited (ABN 56 072 892 365, AFSL 288160) ('OnePath General Insurance') - call 13 20 62, and QBE Insurance (Australia) Limited (ABN 78 003 191 035, AFSL 239545) ('QBE') - call 13 37 23. Australia and New Zealand Banking Group Limited (ABN 11 005 357 522) ('ANZ') is an authorised deposit taking institution (Bank) under the Banking Act 1959 (Cth). OnePath General Insurance is owned by ANZ – it is the issuer of the product but is not a Bank. This product is not a deposit or other liability of ANZ or its related group companies and none of them stands behind or guarantees the issuer. The information provided is general in nature and does not take into account your personal needs and financial circumstances. You should consider whether ANZ Home Insurance is right for you by reading the ANZ Home Insurance Product Disclosure Statement (PDF 1.05MB) or ANZ Landlord Insurance Product Disclosure Statement (PDF 940kB) before acquiring or continuing to hold the product, which is available by visiting any ANZ branch, by calling 13 16 14 or by visiting the ANZ website.
ANZ Financial Planners are representatives of Australia and New Zealand Banking Group Limited, ABN 11 005 357 522, the holder of an Australian Financial Services licence.
The information provided is general information only and does not take into account your personal needs and financial circumstances and you should consider whether it is appropriate for you. Before making any decision to acquire, hold or sell any financial product, ANZ strongly recommends that you seek financial planning and/or tax advice and read ANZ’s Financial Services Guide (PDF 104kB), the relevant Product Disclosure Statement and/or Terms and Conditions. Terms and conditions are available on application. Fees and charges apply.
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