As with any form of profit generating activity, the expenses you incur in order to make an income are generally tax deductible. Naturally, this applies to investing in property. Today we’ll be looking into the range of investment property tax deductions items you can claim in order to minimise your tax bill.
Maintenance Costs
If you’re paying someone to tend the garden or to provide cleaning services, you can claim the incurred expenses as a tax deduction. Likewise, body corporate fees represent a deductible expense. Repairs and construction costs for your investment property are also tax deductions you can claim.
Electricity, Gas and Water Bills
If you’re paying the electricity, gas and/or water bills instead of your tenant then you can claim these on tax. Furthermore, you can claim the cost of having these services connected.
Additional Services Provided to Your Tenants
Providing additional services to your tenants such as telephone, internet or pay TV can all be counted as property investment tax deductions. Of course, if your tenant is paying for these services they can’t be claimed.
Fees, Rates, Commissions and Charges
There are several fees and charges associated with owning an investment property. Some of these include:
- Real estate agent fees and commissions
- Solicitor disbursements and accounting fees
- Advertising for new tenants
Bank charges, interest on loans and mortgage repayments are all costs associated with your investment property that reduce your taxable income. Depreciation on your assets is also included.
Now, because these items all reduce your income you don’t necessarily want to run out and increase them in order to reduce your tax bill. Just be aware and keep these investment property tax deductions in mind so you can make your property investment more profitable.
We all know that investing in property can be a great way to generate passive income and increase our wealth but a question that frequently arises is whether to invest in commercial property as opposed to residential property. Both forms of real estate have their own unique attributes that may appeal to the prospective property investor but knowing the differences between the two will enable you to make better educated decisions as to where you should invest your money.
Commercial and Residential Property – What’s the Difference?
This is pretty straightforward, residential property is defined as land that is predominantly used for housing, including such structures as family homes, apartments, condominiums and the like. Commercial property is primarily utilised for conducting business that cannot be defined as an industrial operation. In other words, land or buildings that are utilised to generate a profit.
Advantages of Commercial Property over Residential
Commercial property leases tend to be a lot longer than residential property leases, anywhere from three to twenty years as opposed to your typical residential lease, which is often 6 to 12 months in duration. Furthermore, commercial property leases are often backed by guarantees from banks which makes them a much more stable investment. It’s not uncommon for a business to take better care of the property than a residential tenant, as appearance tends to have a correlation to the professionalism and profitability of the operation. This is not to suggest that residential tennants are slobs by default, more that commercial tenants have a greater financial motivation to looking after their dwellings.
Residential Property Investment Benefits
It usually costs less to purchase a residential property and hence a smaller deposit will be required. Rates on residential properties are usually much lower than for commercial endeavours. Additionally, the profit potential of residential investments tends to be more predictable than for commercial property. Historically, residential investments generally double in value every decade or so. Another advantage of residential properties is that is oftentimes a lot easier to find tenants to fill the vacancy, not so much for commercial property.
Regardless of whether you make the decision to invest in commercial property or residential property it always makes sense to speak to a property investment expert before committing your funds to a substantial investment.
For most people, the single greatest liability they will ever own is the home they live in. Most first home buyers find themselves laden with mortgage debts and struggle to even dent the principle of their home loan and merely cover interest costs for several years. Over time, the total amount of mortgage debt really stacks up. Fortunately, there are a number of ways to not only pay off your mortgage sooner but also reducing the total amount of money you have to repay.
In essence, reducing mortgage debts is enabled by increasing the amount and frequency of your repayments. Additionally, there may be ways to take advantage of lower interest rates in order to reduce the total amount of debt that needs to be repaid.
Methods of Mortgage Debt Reduction
By increasing the frequency of your mortgage repayments, for example weekly or fortnightly instead of monthly, you will be reducing the average daily balance of your mortgage throughout the year even though the total amount of repayments is the same.
If you increase the amount of each repayment you make you will be reducing the principal of the loan as well as the interest associated with it. The longer you take to pay off a loan of any kind, the more you will end up paying in interest.
Mortgage refinancing is another way of reducing mortgage debts. To put it simply, this involves taking out a second mortgage at a lower rate of interest than the original mortgage. You can then use the money from the new loan to pay off the old one. You’ll still have to repay the new mortgage but there will be less interest to pay off.
A somewhat riskier method of juggling interest rates is to pay off the majority of your living expenses with a credit card. As long as you can afford to repay the credit card debt within the interest free period you can allocate your own funds to minimise the average daily amount of your mortgage.
These approaches will usually apply to reducing the non tax deductible debt on your home property but can also apply to investment properties.