Frequently asked questions

Finance

Can I buy with no deposit?
If you own your own home or have decent amount of equity, you may be able to use your home as security to borrow 100% finance for an investment property.

What if interest rates go up?
You can protect yourself from interest rate fluctuations by fixing your interest rate through your lender for periods of 1, 3, or 5 years.

Should I go interest only or principle and interest?
For residents who plan to continue working and want to build a portfolio of property investments, an interest only loan means that the additional principle payments can be used to either pay down you permanent place of residence (home) or be put towards another investment property. Paying principle off an investment loan reduces the amount of the loan, which then reduces the amount of tax benefit you may otherwise be entitled to receive.

If you are only a few years from retirement and would like to keep your investment home after retirement, it may suit to pay off principle and interest with the view of reducing the overall debt and turning your investment into a positive cash-flow property. Remember, with reduced income (and therefore tax payment) after retirement, your tax benefits from your investment property will also be reduced.

Can I purchase a property through my Self-Managed Super Fund (SMSF)?
If you have a SMSF in Australia, via a structure called a ‘Bare Trust’, your SMSF can invest in a residential or commercial property. If kept for more than 12 months and then sold (during the accumulation stage prior to retirement age), the Capital Gains Tax is only against 10% of the gain and if sold after retirement there is no CGT payable.

During accumulation stage, the tax payable on rent received is at 15% and after retirement, there is no tax on rent received making a SMSF housing purchase an ideal investment.

(This area is complicated and should be discussed with a specialist Accountant or Financial Planner before attempting to buy through an SMSF)

How much deposit is required for foreign investors?
Most banks would require a 20% - 30% deposit when financing an international purchase.

Tenants

How can I be sure of finding a suitable tenant?
Securing a good tenant is the responsibility of your property manager. They take applications, conduct interviews and check references (including National rental database) before making a recommendation to you. RPIA recommend only the most professional property managers to our clients.

Is there a rental guarantee?
Australia has one of the lowest vacancy rates (1.4% - 4.3% - Nov 2010). Many rental guarantees have been in some way factored into the sale price of your purchase, I.E. you are paying your own rental guarantee up-front, whether you ever need one or not. We suggest you set aside around AU$15 per week as a safety net if your investment should stay vacant between tenancies.

If after a couple of years you have not needed to access the ‘guarantee funds’ you will have access to AU$1500 to use for personal use or to put towards paying down your own mortgage.

What if the tenant damages my investment home?
We recommend each of our landlords take out ‘Landlord Protection Insurance’. This policy costs approx. AU$200 per annum and covers you for loss of rent and or malicious damage if a tenant breaks a lease and or damages your property.

Apartment VS home and land

Both apartments and home and land have their own individual advantages and disadvantages, often it comes down to each individual project and your own personal investment preferences.

Here are some benefits and disadvantages of both types;

Apartments

Advantages
Less maintenance
Close to CBD
Secure complexes      
Less Stamp Duty

Disadvantages
Higher body corporate outgoing fees
Often more investors than owner occupiers
Smaller in size and number of rooms
Less land value to appreciate

Home & Land

Advantages
Bigger homes 4 bed, 2 bath
70% - 80% owners, less investors
Large land content for appreciation
More room for children and entertaining   

Disadvantages
Further from CBD
More yard to maintain
Less infrastructure
May take longer for maximum capital growth


What is the process?

  1. Attend a free property investment workshop (Perth, Melbourne, Sydney, Brisbane, London, Manchester, Canada, South Africa, Hamburg and Kuala Lumpur)
  2. Have a one to one strategic consultation at no cost
  3. Obtain a finance pre-approval
  4. Consider property options and choose a State and investment package
  5. Pay an initial deposit (amount depends but usually 10%)
  6. If non-resident – obtain FIRB approval RPIA assist you with this process
  7. Arrange formal finance approval
  8. Settle on land (if home and land package) then pay progress payments for construction
  9. If apartment wait for completion then transfer title and settle
  10. Appoint property manager to secure tenant
  11. If Australian resident complete tax variation form
  12. If non-resident, keep file of expenses for future claims
  13. Make second investment purchase and repeat stage 3 onward

Can I spend some of my investment equity without paying capital gains tax?

You only pay capital gains tax (CGT) when you sell your investment property. If however you choose to use some of the accumulated equity via a line of credit or by refinancing, you can use the equity and pay no tax.

Many clients use property as a way to top up their retirement plan and the more property you own, the more equity you potentially have access to.

Article provided by  

 
 

Working In Websites