First National Real Estate

IF YOU DO NOT HAVE, OR PREFER NOT TO USE CASH FOR A DEPOSIT, YOU CAN BORROW AGAINST THE EQUITY IN YOUR HOME. USING HOME EQUITY A home equity loan may be used to cover your deposit as well as other costs of purchasing such as stamp duty, legal fees etc. NEGATIVE GEARING Negative gearing is a common term associated with property investment. Put simply, it refers to the situation where your outgoings may, particularly in the early stages, exceed the incoming rent on the property. Where this occurs, there may be the opportunity to gain tax advantages. If you are a PAYE taxpayer, you may not have to wait for the tax adjustments as you may be eligible for a tax reduction. Nonetheless, negative gearing is not for everyone because there are risks. Property values may decline from time to time, the flow of rental income may be interrupted, interest rates may rise or your ability to finance the cost of borrowings may suffer. Investors need to take into account their ability or willingness to deal with these risks and discuss them with their adviser before negatively gearing an investment property. 1. TIPS If you already partially own your home, or have paid off your mortgage fully, tapping into your equity provides a viable method for launching yourself into property investment. 2.3. If your home was valued at $700,000 and you owed $350,000 on your mortgage, you might consider investing 10 per cent of the equity (or $35,000) into another property. You could do so provided that you can comfortably afford the repayments. Affordability should be your main consideration. If you have any doubts, consider the advantages of pooling resources with people you know in order to get into the property market. There are a myriad of home loan options that cater to multiple ownership arrangements. PROPERTY MANAGEMENT GUIDE 10