Renting out your own home, and/or occupying investment homes for others to live in can generate you four different sources of income. You'll will be pleasantly surprised.
The cover page of a Depreciator Tax Depreciation Schedule that goes for 20 years
The ATO allows all property investors the opportunity to claim Depreciation on the building and fixed assets that come as part of an investment home. It is interesting to note that around 80% of investment home owners are not aware they can actually claim depreciation on their investment homes for natural wear and tear. Robert Kiyosaki, author of Rich Dad Poor Dad dubs depreciation as "the phantom cash flow." Irrespective of the age of your investment home/s, depreciation has the ability to minimise your tax liabilities as an investment home owner, however, seek appropriate financial and accounting advice on this.
In order to claim depreciation on your investment home, it is critical to choose the right Quantity Surveyor with the right qualifications, instead of a data collector to work on your Tax Depreciation Schedule. In order to claim depreciation and earn some extra income on diminishing assets, you will need a Tax Depreciation Schedule. From first hand experiences, the writer has found the schedules prepared by Depreciator to be thorough. Their schedules are easy to understand, and they're accountant friendly too.
Investment home owners enjoy many tax breaks, even on holiday rentals.
2. Other tax breaks
In renting out an investment home, you will be able to claim a tax deduction on the following to name. Again, please double check with your accountant as the tax rules are constantly evolving:
Home loan interest
Home loan bank fees
Strata (if your investment home is strata titled and/or has common areas)
Property management fees
Renovations (on depreciation as per the above)
Pay TV/Internet connection
Gifts for tenants and property manager
Travel to the investment home for the bi-annual inspections - only if you wish to be present.
Have personally paid for such expenses on a credit card linked to such investment homes, and such credit cards have attracted decent frequent flyer and other awards points - a form of income to boost your lifestyle in exchange simultaneously.
Love those monthly rental cheques too
3. Rental Income
The most obvious source of income when renting out your investment home, in which you receive rent at a set amount per week. If you employ the services of a property manager, rental income (sometimes more depending on how ahead the tenant is on their rent) gets deposited into your bank account on a monthly basis. Renovating and/or providing extra furniture items to your tenants drives up rental income.
Despite this being a high rise apartment complex, capital growth is still feasible.
4. Capital growth
The area, demand and supply drives up house prices, as well as the land attached to the house. Despite the structure and man made assets depreciating in value, the investment home generally becomes more valuable over time. It is important to buy your investment home at the right time, and you will need to trust your gut instincts and data analysis on this. Of course, the capital growth is in your possession when you sell the investment home after all selling expenses, and while holding and renting the investment home, any realised capital gains is known as equity. This is beautiful as equity is still money...money that can be used to buy more investment homes if you wish, and/or to realise a higher net worth.
Come to think of it, there are some other ways that investment home owners earn some extra money from their homes. A couple are quite quirky, such as allowing someone to use your home for a film for a day and so on.
Best of luck with your investment home. Play your cards right by utilising as many sources of income as you possibly can. If you have any other ideas, please share them.