Using property to get ahead

Using property to get ahead

Building your wealth with bricks and mortar

Whether you’re looking to buy your first home, invest in a property or downsize in the lead-up to retirement, there are ways property can help you build wealth.

Getting it right

Whatever your goals might be, it’s important to consider a few things before you invest in property:

  • How much will it cost to own a property?
  • How will you find the right home loan for your needs?
  • Can you unlock the equity in your home?
  • Are there any tax implications?
  • What are the risks involved?

The benefits of buying property as an investment

When you invest in property, you have the potential to benefit from:

  • an increase in the value of your property over time
  • an additional source of income once the property becomes positively geared
  • tax advantages, such as gearing.

But like all investments, you need to make sure you can cover your loan repayments without it affecting your lifestyle. You should also be aware that the value of a property may go down.

Using equity in property to invest

Releasing the equity in your home and using it to invest could help you:

  • build wealth more quickly
  • benefit from gearing 
  • pay off your home loan sooner using debt recycling , providing you’re able to manage the risks involved
  • buy property sooner than if you’d have to save money yourself.

But remember when you use equity to purchase property, your overall level of debt increases, your repayments will increase and you'll have more financial responsibility.

The term gearing simply means borrowing money to invest. An investment can be negatively, neutrally or positively geared—depending on the relationship between the costs of owning the investment and the income generated.

  Negative gearing(i)
Neutral gearing(i) Positive gearing(i)
What is it? The interest payments and other investment costs are higher than the income you receive from the investment. When the interest payments and other investment costs are equal to the income you receive from the investment. When the interest payments and other investment costs are lower than the income you receive from the investment.
How can it affect my tax obligations? You can claim a tax deduction for the interest and investment costs and reduce the overall tax you pay on your other income. You can claim a tax deduction for the interest and investment costs against your investment income. You won’t be able to reduce the tax you pay on your other income. You can claim a tax deduction for the interest and investment costs against your investment income. Your income will be subject to tax, but you can use the surplus income to reduce your loan.

(i) This is our general understanding of current legislation and rules as they apply to individual taxpayers. Taxation laws and their interpretation may change from time to time. We recommend that you consult your tax adviser for advice on your personal situation and before implementing a gearing strategy.

 

Go to Q&AMP to build your financial knowledge

How much equity do you have in your home?

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Want to learn more about buying property through super?

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Important information

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It’s important to consider your particular circumstances and read the relevant Product Disclosure Statement or Terms and Conditions before deciding what’s right for you. This information hasn’t taken your circumstances into account. 

This information is provided by AMP Life Limited. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you. All information on this website is subject to change without notice.