I completed a Cert IV in Property Services a couple years ago and have a strong interest in real estate as an asset for investment.
There is a lot of talk currently about negative gearing and whatever happens, we will all be affected. It’s the “wind that blows” according to Jim Rohn, a great inspirational speaker.
One of the topics which comes up about negative gearing is whether it should be available for existing dwellings or only new house and land packages.
As a result, EzyLearn is creating a real-life case study covering the investment and tax benefits of investing in a new house and land package. There are certainly plenty of them going up in the Central Coast to Newcastle and Maitland area!
Real Estate as an Investment
I believe real estate is a terrific investment provided you don’t stretch yourself financially. It does fluctuate in the short term, but you have to think long term.
Certainly, the recent changes in the real estate market, with Sydney property prices dropping over 15 per cent, means that if you bought in the last 2 years your property is worth less than what you paid for it.
Less Equity, Same Debt
The problem with house prices going down is that this affects your equity. Equity is how much of the property YOU own. The banks DEBT stays the same and only reduces as you pay down your loan.
The problem with your equity decreasing won’t matter in the long term because house prices generally continue to increase, but it will be a problem if you need to refinance or can’t afford the repayments and need to sell.
It’s these situations that make lenders charge mortgage insurance. If you borrow more than 80% of the value of the property, you’re up for mortgage insurance.
The ability to borrow so much of a properties value is GREAT when property prices increase, because you only actually have a small amount of equity (which increases) but when prices go down it can be very stressful.
Depreciation and Negative Gearing
This is a hotly discussed topic right now but it mainly affects whether property investors should be able to claim negative gearing if they buy an existing dwelling.
This is not so much of an issue for new dwellings because governments generally want to encourage builders and developers to erect new homes to house the population.
Property Investment Course
EzyLearn is adding a new training course manual & workbook to our property investment course that is totally focused on the tax benefits of investing in a new property.
The great news for Sydney and Melbourne investors is that you can invest $450,000 to $600,000 and buy a completely new house and land package in the Central Coast to Newcastle area of NSW. This makes it much more affordable than the capital cities.
Featured image: Allam Builders and Developers’ new house in Forresters Beach Estate, Central Coast of New South Wales