FAQ

COMMON QUESTIONS ABOUT PROPERTY

WHAT IF I DON'T GET A TENANT?

Short term vacancy can be normal part of property investment. To cater for vacancy between tenants, you will have built into your budget a “vacancy factor” of at least 10%. This way you are only assuming 47 weeks worth or rental income each year.

Long term vacancy is generally created in the one of two ways and is avoidable:

The property becomes uninhabitable due to damage or tenants departing without notice. In this case your Landlord Protection Insurance will meet the rent while the property is being repaired or the next suitable tenant is being sourced (subject to conditions of the policy).
You are trying to achieve a rent in excess of what the market dictates. Your property manager will ensure the property is positioned in the market to maintain maximum occupancy.

WHAT IF THE INTEREST RATES CHANGE?

As this is a medium to long term investment strategy, one could expect the interest rates for predetermined periods of time may change and may affect investors differently based on their individual circumstances. As interest is completely tax deductable, any increase in the interest rates will also increase your deductions.

WHAT IF THE GOVERNMENT CHANGES THE RULES?

Changes in tax law are not generally made retrospective, a principle know as “Grandfathering”. Governments are interested in creating economy not just conserving revenue. Property investment provides many areas of benefit for the economy such as:

The creation of jobs through the construction and sale of property.
The creation of tax such as stamp duties and income tax paid by builders, electricians, plumbers, etc.
Providing housing which governments do not have to fund or maintain.
Positioning you for retirement without having to rely on the welfare system.

Any change of rules are generally to ensure that people are not abusing the system and are working within the guidelines provided.

WHAT IF THERE IS NO GROWTH?

Property markets, like all markets, go through cycles and over the complete term produces real capital increases (what was the property worth 20 years ago?). Most people acknowledge the last few years have brought us to the top of the cycle, and we are now starting the next cycle.

The Property market tends to cycle every 7 to 9 years on average. Through these times we experience periods of zero to low growth through to periods of very high growth. If you are buying or selling property every couple of years as investors do, you may very well experience low or no capital growth. Investors looking for short term, speculative gains generally look to more volatile investment markets. As yours is a medium to long term investment strategy designed to harness your tax and not effect your current lifestyle, you may enjoy the effect of one or more complete market cycles.

WHAT IF I LOOSE MY INCOME/JOB?

Should you loose your income, you will loose your liability to pay tax and ability to make your own small contribution. For most people there is some form of compensation or pay out for lost employment allowing time to find another source of income. Alternatively, you may wish to consider some form of Income Protection Insurance based on your particular circumstances. The amount you need to maintain the investment for 12 months without income is the total of your tax rebate and your own contribution only, not your total annual income.

WHY AM I USING COLLATERAL SECURITY INSTEAD OF CASH DEPOSITS?

By borrowing (100%) the full amount for the property plus any associated costs. This will maximise the tax rebates that you generate, allowing you to use your cash for other purposes/investments. The property will not increase in value any faster by putting your own cash into it. Some people only ever use their property for shelter. You are utilising yours to provide a basis to build a property portfolio and future wealth.