Purchasing residential properties in Ingleburn to rent to third parties has always been a popular wealth creation strategy in Australia. Everyone seems to have an opinion about the state of the real estate market in their area, and do their best to follow the trends. There are many benefits to the investor who purchases a rental property, especially if they intend to stay in the market for the long term.
Negative Gearing Still an Attractive Option
Holding a rental property in Ingleburn for the long term allows the owner to use the cash flow generated by a paying tenant to assist with mortgage payments. It also allows them the tax benefits generated if the property is negatively geared. This is the term used for a property that was purchased on little or no deposit, is fully mortgaged and is effectively running at a loss.
When all expenses including the mortgage and interest payments, utilities, insurance, agent fees, depreciation and any other holding expenses are not covered by the weekly rental payments, this loss reduces the taxable income. This is called negative gearing and is, and has been for some years, a legal way to reduce a tax liability. Depending on the individual tax situation, this can result in a refund to the taxpayer when their return is processed.
Tenant Demand for Rental Properties Expected to Continue
While the property market has not recovered to its pre-GFC prices, there is still solid activity in most locations, including real estate. Rental properties are in demand because, for the first time since the 1960s, there are now more people looking for rental accommodation than those looking to build or buy their own home. The additional benefit that this situation creates is that for some years at least, the owner of a rental property can be reasonably assured that it will not remain vacant for very long.
Investors holding rental properties who are approaching retirement have the luxury of deciding either to hold onto the property to provide a regular cash flow, or to sell the property and take the capital gain. The latter option does attract capital gains tax. Even so, the money left is still enough to fund a better life style in retirement that could be expected with just superannuation and an aged pension.
With all these benefits attached to owning a rental property, provided the astute investor buys well, there are rarely any negatives. The smartest move is to have the property professionally managed so the owner does not have to find their own tenants or maintain the property themselves. They have all the benefits of building a property portfolio without the work or worries.
