ACT Crown lease basics
Negative gearing is when the costs of an investment property are greater than the rental income. Negative gearing is a popular strategy for investors because it allows them to get into an area’s property market early, allowing them to increase their investment and rental income over time. In most cases, you can count this loss as a tax deduction. If you buy an investment property and hold it at a loss for long enough, allowing the property’s value to increase, you can eventually sell the property at a profit.
Pros and Cons
There are benefits to negative gearing. Such benefits include:
- Being able to claim the loss on your taxes can reduce the amount of taxable income you have.
- Being able to sell the property for a profit after seven to ten years if you’ve invested in a location that is in high demand.
- Being able to attract long-term tenants.
Despite the benefits, there are also some risks you need to be aware of:
- Not having enough regular income to cover expenses on your investment property.
- If you sell the property, any profits you make can be taxed.
- Not having income from your investment property can decrease your borrowing power, making it harder for you to secure future loans.
If you are interested in applying for a construction loan, you may qualify if you meet specific criteria. You can work with a broker to determine your eligibility. If you’re a first-time homebuyer, you may also be eligible for a First Home Owners Grant. For any homebuyer, it may seem frightening to buy a property in Canberra or an ACT leasehold, especially if it is your first home. Working with an experienced mortgage broker can help make the process less daunting. Mortgage Street is a non-bank lender, and our team of brokers can help you find a home loan with the best rates. If you are considering buying in Canberra, our mortgage experts can get you approved for a home loan.
How do lenders assess negative gearing?
Some lenders do not consider the benefits of negative gearing when assessing your loan application. Those that do may not calculate your borrowing power using all of your rental income.
If you are a professional investor or are new to investing, it is essential to speak to a financial adviser when deciding whether to invest in a negatively geared property. This relationship can help you maximise your borrowing capacity. In addition, choosing the right mortgage broker can help you secure an investment loan. Mortgage Street is a non-bank lender committed to assisting individuals in obtaining competitively priced investment loans for their negatively-geared property.