When it comes to building wealth,home equity could be your best asset.
If you’ve owned your home for a few years, chances are you’ve built up some equity. That’s the difference between the market value of your home and the balance of your mortgage, and it can be a powerful tool to build wealth, increase income and deliver valuable tax breaks. As a guide, if your home is worth $600,000 with a loan of $400,000, you have equity of $200,000. Many lenders will let you use this home equity in lieu of a cash deposit to purchase an investment property. Your Mortgage Choice broker can explain how this can work for your personal circumstances.
A buyer’s market
Today’s property market certainly offers ideal buying opportunities. Figures from research group RP Data show affordability has improved, with property values across Australia’s state capitals falling on average by 3.7% in the first 11 months of 2011. Prices are expected to rise in 2012 as lower interest rates fuel buyer demand. Tight vacancy rates are supporting rental growth, and gross yields on rental properties currently average 5.0% for units and 4.3% for houses Australia-wide.
Valuable tax breaks
Along with a steady flow of rent, landlords can also benefit from valuable tax savings. Along with depreciation on buildings and/or fittings and fixtures, investors can normally claim a range of property costs on tax including loan interest, rates, insurance and repairs.
It is important to discuss these tax breaks with your accountant however the combination of rental income and tax savings can make a rental property very affordable – more so if home equity is used to help fund the property.
By selecting a well-priced property in a growth location, landlords can also enjoy significant long term capital gains. Look for areas experiencing population growth or which will benefit from future developments such as improved transport links.
Tax Tips for investors click here
For more information contact Richard Windeyer on 1800 01 LOAN or click here to "Book a Meeting"