We have discussed the many ways in which you can add value to your home and to renovate your home with great returns in mind. According to real estate experts, most first home buyers form a strong attachment with their first home. Given the right circumstances, turning your home into an investment property can be a profitable move.
However, this transformation should be treated as a financial decision rather than an emotional decision. For most people, their first home is often used as a safety net, should relocation or moving in with a partner does not work out. If you look at the decision from a financial point of view, the first home has a lot of equity from debt reduction and capital growth. Because of the high equity, first homes are often positively geared. Since the principle place of residence is free from capital gains tax, home owners have the option of renting it out for up to six years. After six years, the property gets treated as an investment property which will make it subject to capital gains tax.
The real estate experts and finance professionals at Capital Wealth Property highly recommend that those who are facing changes in their circumstances or are relocating for their job should definitely discuss the matter with a qualified financial adviser. This way, they can learn more about the status of their taxes and how they may change during relocation.
Even more important than the taxes are to make sure that the former home has an inclination for strong capital growth and a track record. It is also important to find out whether there is high demand among renters in your neighborhood for properties like yours.
Needless to say, specific property types work great in specific locations. For instance, Victorian or Edwardian cottages located within 10 kilometers of the CBD have great potential for capital growth. The best way for home owners to learn more about how their property may work out in the rental market is to take a look at the sales in the past 6 – 12 months. Furthermore, they can also look at how the property has increased in value over the past couple of decades. Home owners need to understand that not all properties are built equally or increase in value at the same rate.
Home owners can avoid stamp duty, conveyancing charges, building inspections and other house buying costs by keeping their first home functioning as an investment.
By keeping the property and running it as an investment, home owners don’t need to pay stamp duty, marketing costs, building inspections and conveyancing fees. If you are thinking of transforming your first home into an investment property, be sure to consult with Capital Wealth Property for sound real estate and property investment advice. Contact us today for more information.