What To Do With A Buy & Hold Investment Property!

Traditionally in Australia the average property investor opts to invest in property for capital growth with a buy and hold strategy. This strategy is generally very passive where the investor purchasers a property and rents it out to a tenant to help make repayments on the mortgage. The success of the strategy is influenced largely by the market, if interest rates are lower and property prices rise the buy and hold strategy can create a lot of equity in property by holding the property for at least five to ten years.

 

Investing with a Buy & Hold strategy is also a common way to reduce tax as the ‘loss’ (income from rent minus mortgage repayments and other expenses) can be deducted from income. An example may be that you purchase a home for $300,000. Your weekly rent is $300 or about $15,000 per annum and your monthly repayments $1,500 or $18,000 per year. You may also incur other costs such as rates, repairs and management fees of $2,000. The total loss is $5,000 in which you will be able to deduct from your salary on your tax return. 

Buy and Hold properties can be combined with other strategies such as developing where you can build multiple properties and keep one. It can be combined with a renovation to increase the rent and increase the value of the property so that you don’t have to have as much money in the deal.

Existing Buy & Hold properties can also be used to help fund renovation deals or developments. In today’s market, a 4-5% return on investment (ROI) is normal in bigger cities. Existing Buy & Holds can be used as leverage for other deals through either selling or drawing out the equity in them.