If you are looking to buy a home for investment in NSW, you may have a lot on your mind. With plenty of benefits to living in NSW, you might already think that investing in this area is a great idea, but you may be worried about some of the tax implications of making a purchase.
To help you out, our team of real estate agents has broken down some of the key benefits of NSW property investment, as well as some of the things to be aware of. Read on to learn more.
Benefits of Buying a Home for Investment in NSW
Generate Passive Income
Buying an investment property can lead to passive income. The rental market is expanding in NSW, as increasing numbers of people look to rent properties. While this will be offset by maintenance costs, it will still generate useful additional income.
A Long-Term Investment
Property values in Sydney, NSW are rising, which is good news for the long-term resale value of your investment. By offsetting taxes during improvement, you can optimise this value when you come to sell.
Tax Benefits
If your property is negatively geared — for example, if interest on the home loan exceeds rental income, or if you are improving the property before it is let out — you could be in line for tax deductions. With the right approach, this will help you to manage short-term losses and maximise long-term gains.
Things to Be Aware of When Buying an Investment Property in NSW
Land Tax
Generally, you will have to pay land tax on any property that is not classed as your principal place of residence — i.e., the home you live in most of the time.
This is calculated according to the property value and the status of the property. As of 2021, if the property is worth above $755,000, it will be classed as above the general threshold. If it is worth $4,616,000 or above, it will be classed as above the premium threshold. Please note, these values change every year — the general threshold was raised by $21,000 between 2020 and 2021, while the premium threshold was $128,000 higher in 2021 than in 2020.
To calculate the land tax on your investment property according to the general threshold, use the following formula:
(Total value of the property – The general threshold level for the tax year) / 100 = n (n x 1.6) + 100 = Amount of land tax due
To calculate the land tax on your investment property according to the premium threshold, use the following formula:
(Total value of the property – The premium threshold level for the tax year) / 100 = n (n x 2.0) + 61,876 = Amount of land tax due
Investment Home Loans
Investment home loans tend to be slightly more expensive than taking out a loan to purchase a primary place of residence. There are a number of factors that cause this, including the increased perceived risk for the lender.
While the differences may appear small, they can quickly add up over the full term of the loan. This means you could end up having to pay thousands of dollars more than you would have to on a primary residence property home loan. This is why it is so important to speak to an expert broker and consultant before you make a decision.
Reach Out to Our Team and Learn More
Whether you are in search of a primary residence property and wondering why living in NSW is so great or you are seeking advice for an investment purchase, reach out to our team of NSW realtors today.
