Investors

Investing in property is a popular strategy for building wealth, often by renting the property out to generate income. If you’re considering entering the Australian property market, here are key factors to keep in mind at any stage of life.

With soaring property prices, rental shortages, and a chronic housing supply issue, purchasing an investment property can be a strategic way to step onto the property ladder and secure long-term financial growth. Property investment is often considered relatively stable and lower-risk compared to other asset classes, offering potential benefits such as:

Capital Growth – While not guaranteed, property values have historically increased over time.
Rental Income – Earn a steady income stream from tenants.
Tax Benefits – Certain property-related expenses can be tax-deductible.
Tangible Asset – Unlike stocks, real estate is a physical asset that some investors find more reliable.
Lower Volatility – Property tends to be less volatile than other investment options.
Value-Adding Potential – You can increase the property's value through renovations and upgrades.

Considerations Before Investing

While property investment has many advantages, there are important risks to consider:

Market Uncertainty – Not all properties appreciate in value, and some may even decrease.
High Entry Costs – Buying property requires a large initial investment, often hundreds of thousands of dollars plus additional costs like stamp duty.
Debt Obligation – Most investors take on significant debt to finance their purchase.

Property Investment Strategies

Capital Growth

Example:

Rental Yield & Income

Many investors rent out their property to cover expenses and generate passive income. Rental yield is a way to estimate a property’s earning potential and compare investment options.

Gross Rental Yield Example:

Tax Benefits

Tax implications play a significant role in property investment. As tax laws frequently change and vary based on personal financial situations, it’s highly recommended to seek expert advice tailored to your needs.

Negative vs. Positive Gearing

Gearing refers to whether your property investment is making a profit or loss after expenses.

Understanding these strategies is key to making informed investment decisions. If you’re considering property investment, Lenders Spot Finance is here to help guide you through every step of the process.

Positive Gearing	Negative Gearing
Positive gearing occurs when the rental income from your investment property exceeds your loan interest and other ongoing expenses, resulting in a profit.	A negatively geared property means the expenses of owning it, including loan interest and maintenance costs, exceed the rental income it generates.
For example, let's say Peter purchases an investment property in Brisbane CBD for $600,000.	For instance, George buys an investment property in Melbourne CBD for $440,000 and earns $350 per week in rental income.
Let's say he earns $550 per week in rental income from his investment property.	And his annual property expenses, including mortgage repayments, strata fees, and repairs, total $420.
And his weekly property expenses, including mortgage repayments, strata fees, and repairs, amount to $500.	Weekly rental income of $350, minus property expenses of $420, results in a $70 weekly shortfall.
Peter’s property generates a positive cash flow of $50 per week or $2,600 per year.	This amount would be subtracted from George’s taxable income.
Benefits of Positive Gearing: Higher Cash Flow – Generates additional income Reduced Financial Risk – Easier to cover expenses Diversified Portfolio – Enhances investment stability	Benefits of Negative Gearing: Tax Deductions – Offset losses against taxable income Potential Capital Growth – Long-term property value appreciation

Capital Gains Tax (CGT)

Capital gain is the profit made from selling a property, calculated as the difference between the purchase price (minus associated costs) and the sale price (minus associated costs).

If you’ve owned the property for more than 12 months, you may be eligible for a CGT discount. Capital gains tax is part of your income tax, meaning your net capital gain is added to your assessable income in the tax year the property was sold.

How Can I Use My Home Equity to Invest?

With rising property prices, many Australians are leveraging home equity to refinance and fund new investments. You can use your equity for:

Refinancing Your Loan

Refinancing your investment loan can help you save money by securing a lower interest rate and a loan structure that better suits your financial situation.

When was the last time you checked your home loan’s competitiveness? You might be stuck with a high-interest mortgage with limited options. Exploring refinancing could unlock significant savings and better terms.

Buying an Existing Investment Property vs. Off-the-Plan

A strong investment property should be evaluated based on three key factors:

Whether you’re buying a new or existing property, Lenders Spot Finance can help you secure mortgage approval and choose the right financing solution.

Rentvesting: Investing While Renting

If you can’t afford to buy a home in your preferred location, rentvesting could be a smart alternative. This strategy allows you to:

As property prices continue to rise in major Australian cities, rentvesting helps investors enter the market while maintaining their desired lifestyle.

Need expert guidance? The Lenders Spot Finance team is here to help you navigate your investment journey.