FAQs
Why is property investment a wealth strategy?
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.
Is it easier if I already own a property?
If you already own your home and if you own roughly half you can borrow up to 110% of the investment property. Hence by owning a property, especially one that is growing better than the average capital growth rate you can quickly build up wealth, this can be accessed for you to repeat the process.
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