It is a little unfortunate that the 2017 electioneering and then the publicity surrounding the Tax Working Group and capital gains tax, has created some confusion around the benefits of property investment.
The ability to use our home equity (the bit that we own, and the bank doesn’t) has not been removed, and indeed it is common practice to use this as a deposit on the rental property we buy.
It is common in the early days of a rental property investment, that the rental income (which of course is taxable) does not cover the cost of the mortgage instalment, and so a rental loss is recorded in our rental financial accounts. This of course reduces or eradicates our tax liability - until the rental income does reach a point where it is greater than the cost of the mortgage.
And so forgetting the numbers for a moment what is still attractive about the chances of buying that second property?
We have another mortgage, except that this one is given a helping hand with the rent paid by our tenants
We are using that equity building in our existing home to work a little bit harder to increase our wealth
We can use an accountant and a property manager to do the paperwork and keep an eye on our investment
Eventually our tenants will help us get to the point where we are debt free on two properties with an additional income for then time we decide to “slowdown” in later life
One of our major banks is giving significant benefits to assist with the insulation of homes – and significant benefits where the home meets its “healthy home” standard
At Thompson McNeill we are always happy to guide you through the process – if you want to know more give us a call on (03) 281 8605 or email us: