Understanding the advantages of investing in property…
Property investments come in all shapes and sizes. Investors are always looking to maximise their potential return, which can be influenced by the type of property they buy.
When investing in property established properties are easy to visualise as they are existing dwelling and can be inspected and therefore an investor can understand what it is they are buying.
For an investor this can mean a few things and possible opportunity to renovate or redevelop later is a common idea. It is at this point you should work out what your skills are and available time is. If you are a tradesperson who is very handy and has flexibility with work, you might be able to add a-lot of value to a property and capture significant capital gains. However if you are a time poor executive this might sound nice but will be impractical to implement.
When investing in property that is older you may require money or capital to be spent on getting them up to standard. Investors should appreciate that capital expenditure on properties is not generally tax deductable, unlike maintenance. So if you are hoping for a tax deduction when you renovate an older property you may be in for a shock.
Depreciation is also a consideration for most investors investing in property. Depreciation is the allowance by the tax office given as a deduction to account for wear and tear. Most properties have depreciation of two main categories:
* fixtures and fittings, which typically include things like dishwashers, ovens, fixtures and fitting and many more,
* an allowance for the building itself, which is depreciated over a longer period, such as 40 years
If you buy an old property you may not receive any tax deductions for depreciation as it has already been claimed by the previous owners.
So before investing in property you need to work out what suits your situation.