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If you are looking to invest in property, you will have come across the term ‘positive and negative gearing’.

Before building or selecting a property to invest in, it is important to determine what your investment ‘gearing’ strategy is. This is where an understanding of whether your home is positively geared (a cash-flow property strategy) or negatively geared (a capital growth property strategy) becomes significant.

For a better understanding of what these terms actually mean, we have compared the two strategies and outlined the benefits and drawbacks of each. Consider both carefully before purchasing your investment property!

Positive Gearing (a cash-flow property)

gearing

Generally considered the safer, more conservative method, positive gearing occurs when the rental income on your investment property exceeds the cost of maintaining it, including loan repayments, interest, rates and maintenance fees. Positive gearing allows for short-term profit, as the extra cashflow works as an additional income stream. Positive gearing works in areas where rental demand is high (so investors can charge higher rent) and when interest rates are low.

Advantages

Disadvantages

Negative Gearing (a capital growth property)

gearing

Negative gearing occurs when the property runs at a loss – that is, the rental income is less than the costs of maintaining the home. Investors will need to use their own funds to make up the shortfall. Ideally, a negatively geared investment will grow in value over time, and the increased profit from selling it is expected to outweigh the initial financial losses. Negatively geared homes are often located near capital cities, which generally perform better and increase in value over a longer period.

Advantages

Disadvantages

 

Hotondo Homes have over 90 home designs, perfect for investors. Find out more at hotondo.com.au

*Hotondo Homes is not an authorised financial adviser so please seek professional advice for your investing enquiries

When considering investing in property, you will want to choose a home design that is simple and versatile.

You may have multiple tenants over the years at varying stages of their family life, so a versatile design where a study can be turned into another bedroom or a second living room could be ideal.

When building or purchasing an investment property you’ll want to take every step possible to ensure you will get the greatest return. Factors that can impact this include:

There are more financial benefits when you build an investment property compared to buying an existing home, including fewer repairs and you’re able to claim depreciation at tax time.

 

investing in property

 

The benefits

Property can be less volatile when compared to shares or other types of investments.

Property is tangible – you can see exactly what you’re buying.

You are able to rent out the property to gain a second income. If it’s negatively geared you will need to pay the gap between rental income and the mortgage repayments. If it’s positively geared you will have more money in your pocket.

Capital growth – the value of the property may increase over time.

You are able to gain tax benefits for negatively geared properties, depreciation and other expenses that you might have to pay as a landlord.

What to consider

It can be expensive if the property doesn’t have a tenant, if there needs to be any repairs and paying mortgage repayments.

Mortgage repayments can be affected by interest rates, so if there are any increases you may have to pay the difference.

Negative equity – if the value of the property goes down, the property might not be worth what you owe.

Capital gains tax – if the value of the property goes up, when you sell the house you will have to pay tax on the value increase.

It’s best that you speak to a certified financial advisor prior to buying an investment property as they will be able to help establish what would be the best option for you.

The Milestone Range

The Milestone Range is filled with designs perfect for investment properties. These designs are both versatile and practical making them the ideal choice for investors.

With a wide range of designs available including single and double storey, terrace and duplex properties investors are sure to find a home that will suit their needs and help build their property portfolio. Visit hotondo.com.au to find out more to find out more about investing in property.

*Hotondo Homes is not an authorised financial advisor so please seek professional advice prior to buying an investment property.

If you are looking for ways to maximise the potential of your land or seeking an investment opportunity, you should consider building a duplex home.

Essentially a duplex home consists of two separate living quarters and entrances that can cater for two different households, all within one dwelling. Duplexes can be the perfect living arrangement and create substantial financial gain and investment potential.

An investors dream

Duplex homes offer an affordable way to strongly enter the property market and build up your property portfolio. They create the ability to generate two rental incomes whilst owning a single block of land.

Land maximisation

Ultimately with a duplex you can get the most out of your land as a two for the price of one situation emerges. You can generate double the return than if you were building one home on the same sized block.

Options and flexibility

With a duplex home you are provided with different opportunities and options to suit your current stage of life. You can live in one and rent out the other, occupy both or rent out both – the choice is completely up to you.

Meet the special requirements of your family

If you have a family member that requires extra care or supervision, or a grandparent or young adult that’s not quite ready to leave the nest, then a duplex could be the answer. This enables you to be close to your loved ones whilst ensuring they can still maintain their independence. You get to preserve your privacy while still having peace of mind and security.

Hotondo Homes has a range of duplex options to consider:

The Aon 265 comes in two different configurations, the courtyard and the garage.

duplex homeDuplex home

The Halifax is a double storey home that can be used in isolation, turned into a duplex or rearranged in a multiple townhouse development.

Duplex home

For more information on duplex homes, contact Hotondo Homes today at hotondo.com.au

Purchasing a new home can an be expensive process. With insurance, conveyancing fees, council rates and borrowing fees, the ‘extra’ costs can really rack up. One of the larger upfront rates you will be required to pay is stamp duty.

Although the added cost can be painful, it is a necessity when buying in Australia. Read our guide below to understanding stamp duty and how it is calculated.

WHAT IS STAMP DUTY?

Stamp duty is a tax charged by Australia’s state governments in relation to the transfer of land or property. So whenever your purchase land or property you will pay stamp duty.

Every state calculates stamp duty differently, and various factors can influence the cost of it including location, the value of the home and whether you are a first home buyer.

HOW IS IT CALCULATED?

Stamp duty is calculated differently according to where you plan to buy in Australia. Usually the cheaper the property the lower stamp duty will be.

Most states will use price categories, for example $200,000 – $300,000, and charge you according to where your home fits in the price range.

Generally, if you purchase a block of land and build later, you will only pay stamp duty for the land cost. For a comprehensive guide on how your state or territory calculates stamp duty visit your local state revenue office or follow the links provided below.

You can also use a stamp duty calculator for a rough indication of the cost you are up for by clicking here.

ARE YOU ELIGIBLE FOR A DISCOUNT?

First home buyers are generally eligible for a concession or discount cost on stamp duty in order to help them enter the market.

Again, this varies for each state. Head to your local revenue office via the links below for full criteria, or find your local Hotondo Homes dealer here.

FOR FULL CRITERIA REGARDING STAMP DUTY IN YOUR STATE FOLLOW THE LINKS BELOW:
Western Australia

Buying or selling a home, land or investment property is a process called conveyancing.  This is the essential step of transferring the ownership of a property from one owner to another.  Although individuals can handle their own conveyance, it can be quite time-consuming and complex.  This is why most people may choose a licensed conveyancer or solicitor to do the work for them.  Read on for a breakdown of the conveyancing process.

 

Who can do conveyancing work?

Because purchasing a new property is a significant financial investment, it is worth hiring a professional to ensure no stone is left unturned. It is always important to conduct some research before commencing the conveyancing process.

What does conveyancing involve?

In a nutshell, the conveyancing process covers a number of things, such as the payment of the deposit, the balance of purchase price and completing the correct forms to ensure that the property is properly and legally transferred to the correct person.  It also includes making enquiries about outstanding debts, obligations or potential defect or disputes on the property and ensuring that the property is transferred to the rightful owner.  This can be broken down into the following four broad areas:

1. Before signing of contract

For the buyer, a conveyancer is usually engaged until after the contract has been signed.  This is because a conveyancer is not legally able to conduct any conveyancing work for the buyer until after the contract has been signed.  A Solicitor will provide comprehensive legal advice about the contract of sale and Section 32 Vendor’s Statement, advising the buyer of their rights and obligations under the contract, the meanings of special conditions as well as any possible issues with the property.

For the seller, a conveyancer or solicitor will prepare and clarify the legal documents, which is the contract of sale. In addition, a solicitor is also able to draw the Section 32 Vendor’s Statement that outlines the important information about the property.

2. After signing of contract 

A conveyancer or solicitor will investigate whether a government body has a particular interest in the land or whether there are any proposed developments or notifications that could affect the property.  This involves gathering information and making enquiries about the land and title from relevant authorities to ensure that there are no hidden defects, debts or mortgages on the property and that the property is in compliance with Council and State regulations and law.

3. Before completion (before settlement)

During the conveyancing process, a conveyancer or solicitor will draw the relevant documents to ensure that the property is transferred to the correct owner at the end of the process.

A conveyancer or solicitor will represent his or her client and will liaise with the other side directly.  This includes exchange of transfer documents, requesting extension of time if required, answer or ask questions about the property, talk to the bank if there is one involved, and make arrangements once the matter is ready to settle.

A conveyancer or solicitor will calculate the final amount due at settlement after all the relevant rates and charges are paid on the property.  If there is a mortgage involved, a conveyancer or solicitor will talk to the bank to find out about the funds available or payable at settlement and also attend settlement on behalf of his or her client.

4. After completion (after settlement)

Once settlement is over, the conveyancing process is typically finished. In some cases, a conveyancer or solicitor for the buyer may attend to stamping and lodging of the transfer documents.  This means that they will assist in preparation of the documents to pay for stamp duties and to lodge the transfer documents so that a new Certificate of Title is issued in the name of the rightful owner.

If you wish to obtain legal advice or assistance regarding conveyancing, contact Hutchinson Legal using the details below.

Hutchinson Legal

Hutchinson Legal
Ringwood Office: 10-12 Warrandyte Rd, Ringwood VIC 3134
City Office: Level 10, 459 Little Collins Street, Melbourne VIC 3000
Tel: (03) 9870 9870
Fax: (03) 9870 5704
Email: office@hutchinsonlegal.com.au
Web: www.hutchinsonlegal.com.auhutchinson_legal_logo

 

 

 

*Disclaimer: Please note that the information provided in this article is for general information only and is not to be used or relied upon as legal advice. You should seek legal advice from a professional before making a decision to buy or sell property.

 

Notorious property mogul, Donald Trump summed it up when he said, “It’s tangible, it’s solid, it’s beautiful, it’s artistic… I just love real estate.” 1

While that’s easily said by one of the most colourful entrepreneurs of our time, love him or hate him there is a lot that can be learned from his success.

We’ve narrowed down 5 reasons why you should love real estate as much as Donald Trump. 

1.      Every great journey starts with one small step

With a well-researched and comprehensive plan of action, anyone can invest in property.  If you want to earn a sizeable income from building a property portfolio then you need to be honest about you current finances.  Work out where you are and where you eventually want to end up, how much you earn and how much you can afford.  That way you can calculate how you can make your investment property work for you.

2.      It’s all about Capital Gain

Unfortunately it is very hard to create wealth from working alone.  When you put down a deposit on a new home this becomes your money, your asset.  Whilst the value of the property may grow over time, your loan remains the same.  This means your asset, or your capital grows in value.  This is your capital gain.  The awesome thing about capital gain is that unless you sell the house, you don’t have to pay tax on it because it belongs to you!

3.      Think with your head, not with your heart

Donald Trump didn’t become rich by investing in properties he simply adored.  You have to step away from the concept of a ‘home,’ and step into the investor’s more clinical frame of mind.  Will the house increase in value?  Will it receive a steady income?  Are there tax deductions available?  If you can’t answer these questions confidently then you aren’t looking in the right places.  Unless you’re intending to live there, you need to look at what financial income the property will generate.

4.      Tax can be your friend

When you decide to invest in property you must educate yourself on what taxes affect a property investor, which is why it is so important to seek the right advice.  The average Australian employee earns their money, hands some over to the Government in tax and then is allowed to spend the rest.  Put simply the rich earn their money; spend it on some on legitimate business or property expenses, only to be left with a smaller taxable income.  Genius!

5.      You hold the key to financial freedom

Unlike investing in shares, which are subject to inflation and shear luck, property is a much safer investment.  History suggests that property values are a lot more secure than share prices.  In fact, the median house prices in Australia have never fallen by more than 5% in one year.  Whilst there is always risk in investing, it is significantly reduced by the more control you have.

References:

1. http://bit.ly/aBCQXr

2. bit.ly/1jzwV5n

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