Whether you are considering investing in property or have already started, getting a good grasp on these five terms every property buyer needs to know will help you boost your confidence (and possibly your bank account).
The truth is that the better we understand something, the easier it is for us to get the most benefit from it.Â
We know that property investment can be overwhelming, especially for first-time buyers. That’s why at OneCorp, we want to help you understand the necessary terms so you can feel confident as you make your investment decisions.Â
Capital Growth
The simplest definition of capital growth is the rise in the value of something. When referring to property investment, it is the rise of the value of a piece of property. We may purchase a piece of property for a certain amount, and if it goes up in value, we can sell the property for more than we paid for it. Thus, enabling us to make a profit.Â
At OneCorp, we can help you determine if the property you are considering investing in will have the potential for capital growth. There are many factors to consider; one of the most significant is location.
Rental Yield and Net Rental Yield
A rental yield indicates the profit you generate annually from your property as a percentage of its value. In simpler terms, a higher rental yield means more money coming in. You can use your rental yield to measure the profitability of your investments.
When you know the potential rental yield of a property before you buy, you’re also better placed to understand if it is the right place for your investment goals or if you could earn a higher rental yield with a different property.
 At OneCorp, we can help you calculate the rental yield to ensure that you’re charging a fair rent that brings you profit.
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Negative Gearing
You won’t find the phrase ‘negative gearing’ in tax legislation.
The term is commonly used to describe a situation where expenses associated with an asset (including interest expenses) are more than the income earned from the asset. Negative gearing can apply to any investment, not just housing.
Individuals who are negatively geared can deduct their loss against other income, such as salary and wages, which saves them money on taxes. This is consistent with the broader operation of Australia’s personal income tax system.
Australia’s tax system operates on the principle that people pay taxes on their personal income, minus any expenses (called deductions) incurred in generating that income.Â
Although negative gearing is a primary method people use to save on taxes through investment properties, there are a lot of financial structures that can help you save even more.Â
We like to advise our clients to use the same negative gearing principles (i.e. all the tax benefits of an investment property) to be in a neutral gearing position, instead of negative.Â
Equity
Equity is the difference between the current value of your home and how much you owe on it. For example, if your home is worth $400,000 and you still owe $220,000, your equity is $180,000. The great thing is, you can use equity as security with the banks. You can borrow against your equity to fund life’s big purchases. Many banks typically will loan you up to 80% of the equity on your home.ÂCosts and Considerations Specific to Investors/Landlords
A property might have a solid rental yield and is in an in-demand area, but other costs may impact the profitability of your investment. Here are some additional costs to consider:- Body corporate fees
- Building insurance
- Council and water rates
- Land tax
- Landlord insurance
- Property management fees (if you use an agent)
- Repairs and maintenance costs
We Can Help
Ready to start creating passive income with property? Think you’re ready to invest in one or more properties? We can help! At OneCorp, we walk you through every step of the process at NO cost to you. We create a personalized property strategy and help you find the best opportunities on the market, so you know you’re getting the best return. Getting started on your investment property journey has never been easier:- We start by helping you set clear goals and objectives as to what you want to achieve through property investment.
- From there, we run the numbers through proprietary software to accurately assess exactly what you need out of a property portfolio to achieve those goals.
- Lastly, we find the perfect property to make those objectives a reality!
