Investment Property & SMSF Loans

Have you ever thought about buying an investment property but were not sure where to start? One quick phone call to SPC Finance and we can help set you on your way to a solid investment for your retirement.

Property Investment in Australia is very popular due to the stable nature of your investment when compared with Shares, that may provide a slightly higher return but are far more volatile. Investing & borrowing for a rental property is also possible to be done through your Self Managed Super Fund (SMSF), giving you greater control over how your retirement wealth is managed.

There are strict controls over this type of lending and it id not for everyone, but imagine retiring with 4 or 5 homes owned outright in your super fund, providing a stable income. When looking at an SMSF loan it best to speak with your Financial Planner, Accountant and Solicitor first to make sure its right for your situation. If you don’t have one of these professionals working for you, we have reliable contacts in each area that can assist.

Frequently asked Questions:

Q. Do I need a deposit to buy an investment Property?
A. Yes you do. The same rules of deposits and mortgage insurance apply to investment loans as they do for normal residential home purchases. SMSF loans require you to have a 20% deposit and for Commercial Property, you will need between 25-35% deposit, depending on the lender.

Q. Can I use existing equity in my house as a deposit on an investment property?
A. Absolutely! This is one of the best ways of avoiding mortgage insurance & entering the investor market.

Q. What happens if interest rates rise?
A. With an investment loan, you still have the same loan options as you do with your home loan, so you can elect to fix the interest rate to lock in your monthly repayment amount and guard against interest rate rises.

Q. What is Negative & Positive Gearing?
A. Description below has been published in Property Investment Magazine.

Negative Gearing

A rental property is negatively geared when it is purchased with the assistance of borrowed funds and its expenses exceed the rental income and a loss is incurred.

“Negative Gearing” as a term is commonly used when talking about interest costs and depreciation but it includes all the rental deductions.

Losses incurred can then be offset against other assessable income (e.g. salary, wages or business income) – this enables either a reduction in tax payable or a larger tax refund.

The largest part of the deduction is the interest portion of the mortgage. You can, however, claim Property Management fees, rates, loan costs and maintenance and repairs.

Negative gearing deductions are most beneficial to people in high income brackets where they are in the top marginal tax rate. This allows larger deductions when you borrow bigger amounts as you will pay more interest which is 100% tax deductible.

Everyone wants a large tax refund however you should never over commit to get one, you should always seek expert financial advice from a finance expert and accountant to make sure the purchase is within your budget and will benefit you in the long run whilst always being affordable.

Positive Gearing

Conversely positive gearing is where the income received is greater than the total amount of the expenses and therefore creates a situation where tax must be paid on the net income. Generally you will find a newly purchased negatively geared property will have better capital growth than that of a positively geared property.