Property investments can be a great way to create wealth, but it pays to beware of the benefits and pitfalls*. Investing in Australian real estate can benefit you in several ways:
- capital growth
- rental income returns
- tax advantages with negative gearing
Many investors see their property's value increase over time. Capital gains on your own home are tax free. Please seek professional financial advice for in-depth information on capital growth and the related tax benefits.
Obtaining tax advantages from being negatively geared is when you deduct the non-capital costs of owning an investment property from your overall income. The biggest part is the interest portion of your mortgage, but you may also claim property management fees, some loan costs and costs for non-capital repairs.
Where to buy
Remember it's an investment property so leave your emotions out of the decision. You want to invest in an area that will deliver growth potential. Things tenants may be looking for are:
- close access to schools, shops and transport
- proximity to parks and beaches
What to buy
You need to perform the same research you would when buying your own home. Remember that units (versus houses) are normally easier to maintain. When things go wrong in a unit complex, expenses may be shared among the other owners. The bottom line should be a combination of:
- what you can afford
- what rent you expect to charge
- what capital growth the property is likely to achieve
How much can I borrow?
HSBC lends up to 80% for investment properties. Therefore, you will need to provide at least 20% of the value of the property for a deposit.
What are the costs?
Remember that additional fees and costs will generally require 5 - 7% of the purchase price. These include:
the state government tax on mortgage documents and the property price.^
the legal transfer of property title from one person to another.
Might be applicable for particular properties. Check with your home loan manager for more information.
should be activated as soon as the contracts are exchanged, including contents if you are an owner occupier#.
Goods and Services Tax
will be charged with new house and land packages, your real estate agent's selling commission, conveyancing and solicitor fees, valuation fees, moving costs.
Finding the right home
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Terms & Conditions
*There are risks associated with any investment and this document is not intended to list all of them in respect to any particular investment opportunity. You should consider any PDS that is available and seek independent legal and financial advice prior to making any investment choice. Prices, levels and indications contained in this document are illustrative only and may not represent future performance. HSBC does not warrant or represent the performance of any investment opportunity.
^Various governments throughout Australia have indicated their intent to reduce the impact of stamp duty on home owners. You should seek your own financial and taxation advice in respect of any proposed investment or purchase.
Credit provided by HSBC Bank Australia ABN 48 006 434 162. Australia Credit Licence 232595. Terms, condition, fees, charges and HSBC lending criteria apply.