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Investment Loans

More people these days are taking out Investment Loans to buy investment properties or shares. Here we look at some of the things you need to consider when you borrow to invest.

Your Home.

Your home is a big investment and it's costing you a lot in interest. Instead of taking out an Investment Loan, consider whether it would make better financial sense to increase the equity in your home by paying off more of your mortgage. There are substantial risks in gearing too heavily in investment properties.

Investment Property.

If you've paid off the Mortgage on your home, you might consider borrowing to buy an investment property. An Investment Loan property finnace differs from a Home Loan in a couple of key ways. In contrast to a Home Loan, costs associated with an Investment Loan are tax deductible (eg interest, repairs, rates, depreciation, etc). Of course, any rental income will generally increase your taxable income. There is another key way in which investment properties differ from residential homes. While the capital gain on your home isn't taxed, any appreciation in the value of an investment property will be.

Then come the question of where to invest - the city, country, mining towns, regional centres, etc. Careful research and investment advice is needed to formulate a strategy plan before you lock in an offer so that you a 10 year of your chosen areas.

Your investment plan will specify whether you buy new or established. You may get more for money buying established, but your returns and potential gains may be better with a new property, depending on the amount and cost of renovations to be done to an established house and the tax advantages each offers as outlined on the financial plan for the investment.

Financial Strategies.

We have many financial strategies and investment startegies to maximise your returns from your investment, including superannuation, trusts, co-ownership arrangements and more. We can offer you specific advice for your situation.

You will need to consider the taxation implications of owning an investment property and what is most effective way to structure the ownership of the property. Your tax financial planning will cover off on these issues before you purchases and your annual returns will provide a financial review of your investment.

Gearing.

If you earn less from an investment property than it's costing you, you're said to be negatively geared. Why might you choose to make a loss? One reason is that it reduces your taxable income. The other is that you might accept a short-term loss in the hope of a capital gain later. In general we recommend investments that are structured so that they are positively geared as this gives you both income and growth.

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