When considering an investment property it often stems from feeling or hearing that ‘investing in property can be a good idea’. Maybe it’s going to be your first investment property? Maybe you already have an investment property?
- I need to build wealth, because I cannot get ahead doing what I’m doing
- I’m paying too much tax: all the normal PAYG; is there a way to save tax and how do I do it?
- I have some equity in my family home and I need to know options?
- I don’t really understand ‘good’ verses ‘bad debt’: which is a credit card and which is an investment property?
- Why does an investment property help and exactly what does it do for me?
1. DIFFERENCES in COSTS ASSOCIATED on an ongoing basis
Units will typically have some common cost elements because you will be owning a part of a grouped structure, which has current and potential ongoing groups costs and reporting requirements. These typically are grouped into a category referred to as Strata Costs and Strata obligations. There will be a predictable element to this that you can factor in and a possible (random) element depending on the age of the units and the existing strategies of the structured decision group.
This category of cost does not apply if you buy a House & Land Package
2. DIFFERENCES IN SALES TAX
Because sales tax is calculated on the first contract, this means:
- In the case of a unit you will be required to pay sales tax multiplied by the purchase price of the unit. It should also be noted that the sales tax component is typically not able to be financed, so you need to have the deposit available plus the sales tax component;
- In the case of a new House & Land Package, you will only need to pay sales tax on the land value, which represents a considerable up front saving;
- In the case of second hand property of either type or an already built new house, you will need to pay sales tax multiplied by the purchase price. Because the sales tax is only paid on the land value with the purchase of a House & Land package, this may also help an investor with less available deposit or smaller equity in their home, to move forward with their investment strategy.
Because the sales tax is only paid on the land value with the purchase of a House & Land package, this may also help an investor with less available deposit or smaller equity in their home, to move forward with their investment strategy.
3. DIFFERENCES in what YOU ARE ALLOWED TO DO
When you buy a unit you will typically need to conform to the already agreed rules by which that group of units is governed, comply with the governing bodies requirements, potentially attend or vote on group matters and apply for permission for certain aspects of what you want to do with your unit.
When you buy a house, you typically can do with that house and its land whatever you decide to reasonably do. There may be streetscape guidelines, which does help because it makes sure your neighbours don’t do anything weird that may not be great for your view.
4. DIFFERENCES IN YOUR LEGAL RESPONSIBILITIES
With both their will be:
- rates to pay;
- services to sign up for (noting that if there is ever an issue with service provision that requires costs to be incurred, then;
- with a house you are only responsible for your own service provision matters,
- BUT with units you may need to share the costs of issues someone else in the complex has with their provision of services and the ramifications may be broader (more expensive).
- Legal requirements to comply with, which in the case of a unit will include the responsibilities you have under the overall strata structure.