An investment property is becoming a more popular choice for those seeking to create a revenue stream and also achieve capital growth through the investment property value increasing over time.

This can also be part of a strategic financial plan and should be considered by investors as part of a diversified portfolio. When considering an investment purchase you should also source the best investment loan structure for you. With any investment your investment loan can make a difference to your return. If you are negatively geared through an investment loan the cost to you of that investment loan can effectively be reduced.

If you purchase wisely, once there has been capital growth in the investment property over time there is the option of using this built up equity to move into another investment property, take out another investment loan and thereby continue to further increase your investment portfolio.

Aside from the traditional belief that tax advantages are the key driver for taking out an investment home loan there are many other factors to consider when purchasing an investment property.

Below are some key points for your reference, by using these points as a guide in conjunction with a detailed discussion with your accountant or financial planner you will be in a better position to ensure your investment purchase and investment loan is a financially sound decision for the long term.

In relation to property enquiry therefore, you should consider:

* What is the infrastructure like in the area? Are there enough schools, hospitals, shopping centres, doctors and dentists, freeways or main roads?

* What has the historical capital growth been in the area over the last two decades?

* Is the local council planning to increase housing density or add a new road to increase traffic flow?

* If you are purchasing in a new subdivision, are there more new land blocks and house and land packages planned nearby. New developments can impact on the value of your home as purchasers often prefer a new home to one that might be 2 or 3 years old in the same area.

* What length of time will the investment be held? And will this tie in with planned infrastructure development which will in turn accelerate capital growth?

There has been recent press to suggest that investment and home property values in Sydney have a potential capital growth of 18% over the next 3 years so buying off the plan as an investor may be an attractive option in the current market. If you find a good property development, suitable for investment, which has a completion date in say 2010 – 2011 then you can exchange contracts with either a 10% cash deposit or a deposit bond (as a guide the cost of a deposit bond of around $86500 for say settlement September 2011 will cost you approximately $9000- $9500 (significantly less than the interest you would pay over the period if you borrow $86,500 at current interest rates of 9% p.a). The general feeling is that direct investment into property as opposed to into managed property funds is a better way to go – you are in control of your investment and avoid the high management fees so often charged by share and property investment funds.

Do some research on the internet to see which areas have the greatest potential for capital gains – remember if you are looking for an investment property you should invest with your head not your heart. An investment property needs to be well located to transport and other facilities so that those renting can easily access these services.

When considering which investment loan would suit you best take the following into account:

1. Does the investment loan allow you to split it into a number of investment loan accounts. This is a good feature to have in an investment loan because you are positioning yourself for the future – if you use the investment property at a later date to gear into another investment purchase then you can split the account so that the investment loan portion relating to the new purchase is clearly identified. This allows you, and your accountant, to easily track the costs associated with the new purchase.

2. If you use your home property (with an existing home loan) as security for the investment loan then it is imperative that you do not mix any home loan debt with your investment loan borrowings. The ATO in Australia requires you to apportion any additional repayments to a loan where the borrowings are “mixed”. You want to apply any additional repayments to your home loan before your investment loan. You are paying your home loan off in after tax dollars – whereas you can deduct the interest you are paying on your investment loan against the income form the investment property.

3. Does the investment loan allow you to capitalise interest? It is always a good idea to include a capitalising feature as a part of your investment loan to protect you against any unexpected costs in relation to the property. It also means that instead of subsidising the investment costs and interest shortfall on your investment loan you can capitalise these and make additional repayments to your non-deductible home loan debt.

4. If you have sufficient equity in your home then you may be better to consider a 100% + costs investment loan for the investment acquisition and use any savings you intended for the investment purchase to pay down your home loan debt.

If you consider all these points your investment loan will be working in your favour at all times.

The Australian federal budget for 2009 brought about some changes which will offer the small businesses with 50% deduction on the purchases of new equipment. The new equipments include vehicles, servers and computers among others. This is just an addition to the usual tax deductions that are present on the depreciating assets. Small business tax break is the business with an annual turn over of not less than 2 million AUD and can gain from an extra amount of fifty percent tax deduction on a new eligible depreciating assets that costs not less than 1, 000 AUD.

 

This kind of asset has to be acquired by end of December 2009 and installed ready or use by 2010 December. Business tax break may also mean a business with annual turn over of not less than AUD 2Million and could gain from an extra thirty percent tax deduction on the new eligible depreciating assets which costs AUD 10, 000 or more. This asset has to be acquired by end of June 2009 and be installed ready for use by end of June 2010. If you find yourself into any kind of business tax break and you feel that you can seek small business tax break, there are two options that you can decide to do.

 

The first step is to contact your tax accountant and confirm that you are eligible. The next thing is that, you use the same kind of information to approach the hardware vendors. These vendors may include HP, IBM, DEL and Sony among others. The hardware vendors may be willing to come to the party with a good deal and you as an individual may be able to add those extra features to your server that you always longed for. You may be able to add them for free due to the break for small businesses.

 

Australia provides a major boost to its highly successful small business and general business tax break. This offers vital stimulus to support jobs and it assists businesses doing it tough in the global recession. Small businesses will now be in a position to claim a bonus tax deduction of Fifty percent up from thirty percent in the past of the cost of eligible assets acquired between thirteenth December in 2008 and on 31 December 2009, and installed by December 2010. Small businesses are the leading and the back bone of Australia’s economy, employing millions of Australians though these small businesses have faced some tough times during the global recession.

 

Small businesses being the backbone of the economy has sensitized the government to be so determined to assist these businesses to invest with confidence and take advantage of the great opportunities that will come with recovery of the economy. The rise in tax breaks   offers the small businesses with an even greater incentive to invest in the new capital items or products such as computer hardware and to make capital improvements to the existing machinery and other equipments.