If you’re a property investor or looking to become one, it’s important to understand what negative gearing is, as well as the possible benefits, risks and tax considerations that come with it.   To firstly define, gearing is when you borrow money to invest, wherein the income earned from your investment property can be either positively or negatively geared.   Negative gearing or a negatively geared property happens when your rental income is less than your interest repayments and other property-related expenses, giving you a tax loss that may offset your current income. Although the negative return (or loss) may sound literally ‘negative’, any net rental loss you incur during the financial year may be offset against other income you earn, such as your salary. This in turn reduces your overall tax rate and the amount of tax you pay.   Nonetheless, positive and negative gearing strategies both have benefits and drawbacks, depending on your personal circumstances, current income and debts, and risk preferences.   If you’re unsure, consider talking to our property investing specialist for personalized advice.

Some investors go for older properties – but is that the right move? There is nothing quite like buying something brand new, especially when it comes to your property. There are many benefits of a new build home that you just don’t get with an old house. Buying a new property will give you a number of advantages over established properties. For instance, according to homeloanexperts.com.au’s case study, a purchased new unit from NSW with $0 spent on renovations has seen a major 34.9% growth over 11 years, despite Sydney prices doubling in this time.    Advantages of New Build House Built for Modern Living – Generally, newer houses/units have modern amenities, appliances, and technologies pre-installed as such tenants are prepared to pay a premium. Being able to attract high-quality tenants means you reduce the risk/frequency of vacancy on your investment property. Government Incentives and Benefit Deals – Incentives such as the First Home Owners Grant for first home buyers can reduce the upfront funds, plus they only need to pay stamp duty on the land value when buying a house and land package. Security and Protection – All new build house has a Home Building Compensation (HBC), formerly known as Home Warranty Insurance (HWI), which is a legal requirement in all states that serves as the builders’ warranty insurance (in NSW, the home building compensation fund) to affords certain protection against structural/major defects. Low Maintenance Overheads – When you buy a new property, you can benefit from the convenience of not having to spend money on repairs or ongoing maintenance. 10-year Building Warranty for any Needed Structural Repairs – Builders provided 10 years of coverage against structural defects to the designated load-bearing elements of new construction homes.  Energy-Efficient and Produce Fewer Carbon Emissions – Modern homes are built for our new green-driven society, with things like solar panels, low-energy appliances, and insulated walls. Unique and Boutique – Small subdivided areas in established suburbs have good immediate capital growth potential.  In the end, buyers should actively resist the temptation of up-front savings or emotional attachments. It’s more of the right property and location selection that will give you more opportunity for capital growth and rental yield potential.

Accredited Property Investment Selection & Acquisition. At Simply Wealth we only offer and recommend the best available property investment opportunities that exactly meet your needs and situation. We monitor the Australian property market daily. With a variety of quality investments available all over Australia, they must first meet our stringent selection criteria of long-term capital growth, strong rental demand, location and amenities, and of course be of high quality. You’ll be secure in the knowledge that your future is underpinned by the safest investment possible – helping you achieve your goals and dreams faster than ever before. Please contact us for clarification, or further advice, regarding any of the topics covered in this newsletter.  

Investing in property is a dream for many individuals, whether it’s for personal use or as an investment. In Australia, thousands of investors have turned to Self Managed Super Funds (SMSFs) to acquire property and take control of their retirement savings. Discover the advantages of utilizing a SMSF for property investment and how it can provide asset protection, tax efficiency, and personal control over your investments.   Asset Protection One of the key benefits of acquiring property through a SMSF is the potential for asset protection. By accumulating assets within a superannuation fund, you can shield them from commercial and litigation risks that may affect individual members. While specific anti-avoidance rules apply, having property assets within a SMSF can offer added protection.   Tax Efficiency Australian taxation laws provide significant tax benefits for acquiring growth assets, including property, within a SMSF. For instance, when selling a property held within a SMSF, the maximum capital gains tax is capped at 10%. Additionally, interest expenses and other property-related costs, such as depreciation allowances, are 100% tax deductible within the superannuation fund. This tax efficiency makes SMSF property investment more advantageous than traditional negative gearing strategies, especially when considering the 15% contribution tax applied.   Land Tax Benefits As the beneficial owner of a property asset within a SMSF, you can enjoy the Land Tax-Free Threshold in each Australian State. This further enhances the tax advantages of holding property within a superannuation fund and contributes to overall tax efficiency.   Personal Control Acquiring property through a SMSF allows you to take personal control of your investments. Unlike traditional superannuation funds, where investment decisions are made by fund managers, a SMSF empowers you to make strategic choices based on your investment goals and preferences. This level of control ensures that your property investments align with your long-term financial plans.   By harnessing the power of a Self Managed Super Fund (SMSF) for property investment, you can leverage your superannuation assets, protect your investments, and enjoy tax efficiencies that are not readily available through other investment avenues. Take charge of your financial future by exploring the benefits of SMSF property investment today.

Housing holds paramount importance in our lives, serving not only as a basic necessity but also as a fundamental element for our overall well-being. As the most common and valuable investment for Australians, the significance of housing cannot be overstated. In this article, we delve into the reasons why housing matters and highlight its role in property investment, job creation, and the broader economy.   The Multi-faceted Importance of Housing Housing is far more than just providing shelter. It plays a pivotal role in our well-being, as emphasized by Paul Conway, Chief Economist at the Reserve Bank of New Zealand. Beyond meeting our basic need for a place to live, housing contributes significantly to job creation. The residential construction sector employs tens of thousands of people, supporting livelihoods and bolstering economic growth. Additionally, home loans feature prominently on the balance sheets of commercial banks, acting as a crucial link between the real economy and the financial system in Australia.   Driving Factors in the Housing Market The demand for housing has remained consistently strong over the years, driven by factors such as robust population growth, declining neutral interest rates, and a favorable tax system. These factors, coupled with constraints on the supply side, have intensified the demand for housing. Strict land use regulations, the cyclical nature of the construction sector, and high building costs have all contributed to a tighter housing market.   Unlocking Housing Supply To address the housing supply-demand imbalance, urban planning rules are being loosened to unlock more housing supply. This entails constructing more houses and translating high building consents into tangible homes. These efforts aim to alleviate the pressure on the housing market, providing greater opportunities for property investment and homeownership.   The Significance of Property Investment Property investment offers a compelling opportunity for individuals seeking long-term financial stability and wealth creation. With housing playing a central role in the Australian economy, investing in real estate can provide not only a place to live but also a means to generate passive income and build equity over time. Property investments contribute to economic growth, job creation, and the overall stability of the financial system.   Conclusion Housing is undeniably crucial, serving as a cornerstone of our lives and an essential investment avenue. As property investment intertwines with economic growth, job creation, and financial stability, the housing market in Australia continues to present promising opportunities. Understanding the multifaceted importance of housing and its role in property investment enables individuals to make informed decisions and capitalize on the benefits of real estate investment for long-term prosperity.

Are you looking at buying your first home now or in the future? Please read carefully all the steps so that you can make a wise decision.   Mistakes First Home Buyers Make Buying emotionally – Your first home is not likely to be your last home, so it’s better not to get too emotionally invested in the process. Instead, think of it as an investment, and a stepping-stone to your next property. Keep in mind that you are borrowing around 80% from the bank, so it is a big liability for you. With the proper planning, you can turn your liability into an asset. Not factoring in all of the actual costs – Everyone looks at the price of the property first, but it’s important not to let all of the other costs, like stamp duty, conveyancing, moving costs, rates and taxes and insurance and maintenance, body corporate fees, and mortgage fees get left out of the equation. Not understanding the building price or process– Most builders out there will show you the base price to attract your business. In most cases, they do not add the site cost, government levies, driveway, landscaping, fencing and other important items like blinds, fry screen, etc. that you need to have a complete house. For example, if the advertisement says a single-story house starts from $180,000 means it is not the full price, you need to add another $50,000+ for all other charges and items and then your whole building price will be close to $260,000-280,000. If you do not understand the whole process, you might be in big trouble settling in the property. Overextending financially – A mortgage broker can help you navigate loans and work out a budget, so you do not end up taking on more than you can really afford. Not doing your proper due diligence – Do not forget the seemingly little things like building and pest inspections. These can help you avoid potentially big problems down the road. Not understanding the contract, you are signing – Once you’ve signed a contract, you’re obligated to fulfill the terms, so it’s important to know what you’re getting into. Your legal representative can help make sure that you are fully informed before signing on the dotted line. Not getting finance pre-approval – When you get your finances organized ahead of time and get a loan pre-approval, you’ll know exactly how much you have to spend and be at less risk of overextending yourself. Trying to do it on your own or not having a mentor – Buyer’s agents, investment advisors, mortgage brokers, and solicitors are all examples of professionals whose expertise can help make sure that your buying process goes smoothly and you get what you want and understand what you’re getting. Do not try to go it alone. Not planning ahead-Your first property will determine where you going to be in the next 5-10 years. What if the area you are buying is not going up in value or what would you do if your interest rate goes up? What impact would it put on your life or in your finance at a later stage? According to our research, about 11% of first home buyers will sell their house in less than 10 years or will go through massive financial stress due to not having a proper plan. Therefore, you should engage a mentor who helps you to understand the whole financial process and future outcomes. Just do not listen to your friends and family, their intentions are obviously good, but they are not the experts. Not knowing when to buy-Most home buyers are confused about when to buy and they do not understand that when they have a job and banks giving them money is the best time to buy. Property prices between $400,000-$550,000 will never go down in value due to any circumstances. Currently, Melbourne’s median price is $830,000. Any property above that price range may have been affected but not a house in an ideal location that you bought for $540,000. According to CoreLogic data between 1995-2017 Melbourne property price went up by 335%.

Which is the better investment? Should I go invest in property or shares? Many are still stressed about what to choose between these two. But who weighs the most in terms of long-term benefits? If you’re largely considering the safer and traditional way of growing your wealth in Australia, property investment would be the best and smart choice.  Why? Compared to investing in shares, the leverage you can get from buying an investment property makes it the clear better option. Not only that, having the equity from your home by making principal repayments off your mortgage will be possibly granted over time when you invest in property. This then can be potentially used to purchase more homes, which can, later on, expand your investment portfolio.   But who among them did really perform better, historically? Based on the ASX and Russell Investments’ report released in June 2018 which examined the returns of long-term investments, better gross returns were seen in residential investment property from the 20 years to December 2017. From this timeframe, Australian residential property’s returns averaged 10.2% p.a., in contrast with Australian shares which averagely received returns of 8.8% p.a. only over the said period.    Michael Sloan of Better Homes and Gardens Real Estate once said: “If you have $100,000 of cash or equity in your home, you can buy a $400,000 investment property. So, assuming you buy a quality property and stay away from student accommodation and the like. What is going to deliver you a better return long term? A $400,000 property or $100,000 of shares?”    To sum up, property investment is a much safer investment than shares. With it, you can use equity to build your portfolio without more capital needed, and with that, property investment could be a worthy investment strategy for you. Nothing else.