Rules and Regulations Around Property Investment

While you may expect there to be rules and regulations around investing, if you haven’t bought property before, it can be a bit confusing and overwhelming. Understanding what is involved can help you choose the right property to suit your needs and goals. The following are some of the things you need to consider before investing.

Positive cashflow versus negative gearing

Positive cashflow is when your rental income is more than the cost of the property itself (mortgage, management, etc.). With strong rental yield, your investment property will be running at a profit. However, as values rise, rental yield contracts, which means it may not last. Negative gearing is the opposite of positive cashflow. Your property will be running at a loss, because interest on the home loan is higher than that of the rental income. However, this also has its benefits in the form of tax deductions and is a common long term strategy.

Capital Gains Tax

Also referred to as CGT, capital gains tax is an important thing to understand if you want to invest. CGT is the tax you pay on profits from selling assets and can impact your investment returns dramatically. There are a range of CGT rules and exemptions for investors and it is important to be across them if you are planning to rent a property or your principal place of residence.

Stamp Duty

This is a charge applied by the state government in relation to land or property transfer. This cost can depend on a number of factors, such as first home owners, whether the property is to live in or for investment purposes, the location of the property, and the price of it. In Queensland, the only people who don’t attract stamp duty are first home buyers below $500,000.

GST

Goods and services Tax (GST) is another form of tax that applies to the sale of many things, including property. The GST treatment of property varies depending on the type or its purpose.

Property management fees and charges

Fees for management can vary, depending on who you hire (if anyone at all!) but are an important part of having an investment property. They may make a commission from rent or get a one-off payment at the start of a tenancy agreement. If you choose to do this, you are giving them the right to manage the property on your behalf.

Property investment can be very rewarding but also comes with lots of little details. Understanding the rules, regulations, and other factors involved can arm you with the tools to get the best return on your investment. If you need help, we work with financial experts who can guide you through the process, so get in touch today.