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23 August, 2021 / Category: Blog
Investing in property can be a great way to grow assets as part of a wealth creation strategy. However before you embark on the property investment journey, it’s important to understand the key benefits and challenges, and how best to manage your finances to maximise your return on investment.
While the team at Infolio are property experts, we’re not financial experts—and that’s why we recommend you talk with a financial advisor before buying an investment property.
We partner with BlueRock—they are an entrepreneurial advisory firm that creates forward looking strategies for business owners and professionals. We recently sat down with BlueRock’s Private Client Advisor, Daniel Zaffino, to discuss the benefits of negatively gearing your property investment.
Negative Gearing is an investment strategy which involves purchasing a property that has holding costs (interest and depreciation) greater than the rental income it generates. This means you are making a financial loss on your investment, but with negative gearing, this financial loss on your property can be claimed as a tax deduction against your other taxable income.
Zaffino comments that negative gearing can be suitable for clients who are building assets and looking to reduce their income tax, rather than living off the income they provide, “Negative gearing can be useful to reduce tax and offset earnings from other income producing assets”.
As part of a negative gearing strategy you can claim a tax deduction for the losses incurred on the investment. However, be prepared to fund the property’s income shortfall with cash flow.
Zaffino suggests the ideal candidates for negative gearing are “typically younger with a main goal of accumulating wealth, via long term capital growth in the property”. Often in later stages of life, investors are more interested in drawing regular income from their investments to fund their retirement.
Property investment should always be part of a long term strategy, Zaffino and the team at Bluerock will help you to work through your long term financial plan, “at BlueRock we build long term financial models to see how cash flow is affected by future expenses and goals – which can give a clear indication of the best strategies available with regards to property and other investment opportunities.”
Click here to view an example of a negatively geared investment property, calculated using the Your Mortgage negative gearing calculator.
Once you have a solid understanding of your investing capability, you can enjoy the advantages of property investing.
Regional and inner-city investments both offer strong opportunities in certain locations. There are some inner-city areas that make for favourable investments. However, you’ll want to ensure the property has long-term capital growth and a good yield in the short term. Infolio have an in-depth understanding of Melbourne’s inner-city investment opportunities, contact us today for a free consultation.
Regional Victoria has recently seen impressive growth. Most notably, Central Victoria currently offers impressive yields, low vacancy levels and strong capital growth. Talk to Infolio’s dedicated Central Victorian team of buyers advocates for in-depth market knowledge and access.
The Infolio team has a comprehensive understanding of inner-city investing, particularly in Bayside, inner Melbourne, the inner east, the inner south-east, Mornington Peninsula and Central Victoria.
Contact us today for a free consultation and advice on the best spots to buy.
As property advocates and property managers we love what we do. Searching, negotiating and securing the perfect property for our clients, sooner and on better terms.
