Investing in property
There are many compelling reasons to invest in property. If you've done it before you're already aware of the many benefits, but if you're not experienced we'll briefly explain some of the top line advantages.
Negative gearing your investment property
When the cost of owning an investment property exceeds the income it earns, you can claim the loss against your other assessable income.
Talk with a financial adviser or taxation adviser/registered tax agent to find how to make negative gearing work for you.
Negative gearing is popular with residential and commercial investors because you can deduct the non-capital cost of owning property from your overall income. The biggest amount you can deduct is usually the interest, although other costs can also be claimed such as repairs and management fees.
The benefits of negative gearing only start when the property is available for rent.
What about capital growth?
This is one of the main reasons to invest. Despite paying capital gains tax on the increased value of the property if you decide to sell an investment property, it can still be beneficial if it's part of your financial strategy.
RP Data/Rismark is providing a quarterly Hong Kong's residential property market wrap that outlines growth areas in the capital cities.
What about rental income returns?
Even though the rental market can change over time, generally property is a reliable investment and whenever your property is rented you're receiving an income from it.
How do I calculate rental yields?
Weekly rent multiplied by 52, then divide by purchase price and finally multiply by 100 gives you the rental yield. Major cities should usually provide an average yield between 4.5 to 5.5%. For example if you have an apartment worth $400,000 and you rent it out weekly for $390 the rental yield will be:
e.g. $390 x 52 = $20,280 $20,280 / $400,000 x 100 = 5.07%
How can I use the equity in an existing property for investment?
If you already own a home or another property you may be able to help finance a new investment property purchase. But don't forget, if you borrow over 80% of the property value you'll need Lenders Mortgage Insurance.