Thinking of Investing?
So you’ve built up some equity in your own home and now your mind turns to buying an investment property. But should we or shouldn’t we? Well, here’s some ideas that might help you.
The first step is to consider your motivation for the decision and for most people the answer lies in a mix of capital gains, meaning the potential future value of the property, and the negative gearing allowing you to reduce your taxable income.
Sounds simple doesn’t it, but both of these perceived benefits are subject to market fluctuations that might actually work against you. For example a prolonged market downturn in the property market might mean your hoped for capital gains are not being realised or, from the negative gearing perspective, perhaps a stable low interest rate environment changes your negative cash flow in to a positive cash flow. In other words the rental income exceeds the loan interest cost. No tax benefit there.
We’re not trying to talk you out of investing; just suggesting you give us a call before you commit to anything.