I Bet You Wish You Had Advice Like This When You Were Buying Your First Home!
Question: Are you buying your first home or are you buying an investment property – the answer is both, but only if done correctly.
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When you bought your first home, did you one day think it might become an investment property? If you did, it was an excellent idea because I can tell you that is exactly what the majority of young first home buyers that I speak to tell me they plan to do.
Correct structuring and an understanding of this prior to purchasing is a MUST.
What is also critically important to understand is cash flow and the ability to hold more than one property and how to minimise costs while maximising tax benefits.
In my experience and I am sure you can relate, if you think about the really wealthy people that you know, (or look at the BRW 200) most have investment property or built wealth with them.
If building wealth through property is something that so many people aspire to do, then why don’t we get good advice when starting out? Just making the mistake below could put people years behind someone getting the right advice.
So what happens when you move out of that home and it becomes and investment property? Well there are two BIG things that happen and they are SUPER important to understand.
- First, the equity becomes trapped in the property.
- Second, the interest attached to the old home loan becomes tax deductible.
If the goals is to have a home and an investment property conventional advice may be to sell the existing home, take the accumulated equity (with no capital gains tax) and then buy a new home. Then using the equity in the home purchase an investment property.
This gets a tick because it ensures that the investment property has the maximum loan (100%), so it is tax effective and helps with cash flow and servicing.
But it gets a big cross because you have to pay selling costs and then you incur stamp duty on two properties and at this point we are talking about tens of thousands of dollars.
In my experience many people simply move out of their old home, turn it into an investment property and go off to buy a new home. This would be the WORST option of all.
But what if there was a way to
- buy a new home,
- keep the existing property and turn the loan into 100% tax effective,
- access all the equity (TAX FREE) with minimal costs.
I am hear to tell you that when it comes to investing in property you can do it all!
To discover how you can get the right advice when it comes to buying your first home or investment property, contact me today!
