A listener called the radio station last week referring to Steve’s comments about the positive local economy and the increase in house prices. He wished to say ‘thankyou’ as he has been quite depressed for the last few years where he owed the bank more than their home was worth and never thought he would escape the debt trap.
It is great news to hear things are looking up for everybody! Things have definitely turned around & clients are again feeling positive and starting to build on their residential portfolio through equity.
Tax benefits – savings vs equity
If you had say $75k in savings & planned to use this for a deposit & outlays to buy a $550k investment property, Steve would ask, “do you have a home loan”? Why? Because if you had a home loan with some equity, Steve would suggest you pay that $75k off the home loan & borrow $100% against the home equity to buy the investment property.
Why?
Because the interest on your home loan is not tax deductable but all the interest on the investment property is.
An example in North Lakes, Brisbane
Originally, we opted to move out of this highly appealing investment area because, due to popularity, the land was getting too expensive. Another brilliant option, however, is to buy smaller blocks of land & build two-storey! Why are we doing this? There are no tax advantages in the cost of land. All tax advantages…
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are in the cost of the house. In this case, the cost of the land is $257,900. The cost of the house is $331,750. Total cost of land & house therefore is $589,650. The land sizing is 336m2 and the house sizing is 215m2, with a site coverage of only 54%. We even had plenty of room to put a garden shed in the back yard. It is a brilliant composition and in a highly favourable area!
How can I be a part of this?
The only outlay is $2000 for a deposit. If you borrow everything else, it will cost only $158 p/w to pay it off. To summarise: Buy a magnificent two-story home for $590,000 in North Lakes for and outlay of only $2000 & pay it off Principle & Interest for only $155 p/w (because the combined rent & tax refund of $730 p/w pays if off for you.) Now that is positive news!
Need help to start your residential property investment portfolio the right way? Schedule a free, no-obligation consultation and let’s discuss your options.
If you prefer to listen here is my radio interview on Emerald 4HI:
At the helm of Steve Taylor & Partners, Steve has been delivering expert advice and product knowledge to clients for over 30 years. We provide individuals, couples and families with the right strategies to create wealth and change their lives with solid bricks and mortar.
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