Real estate, rent or buy?

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Real estate, rent or buy?
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Real estate, rent or buy?
To rent or buy?
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Our dream to own a piece of real estate to call our own is always present in our minds, just about everybody would like to own their home, but this dream sometimes is not easy to achieve, so, what are the problems that we may encounter? Hereunder are a few key points to consider.
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Key points, from a report I found on the Internet.
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If you buy a property and rent it out instead of living it in you can still benefit from tax relief
You will not qualify for the First Home Owners Grant

When it comes to property, the age-old issue has been should you rent or should you buy. Gillian Bullock discusses the pros and cons of both.

There is a strong argument put forward that investing the money you might have used as a deposit and in mortgage repayments in other assets such as shares could prove a better option.

According to Paul Ahearne, managing director of financial advisory firm Locumsgroup, it can be to your advantage to rent in a market of softening yields.

Meanwhile there is also support for owning your own home, not least because of the psychological value. As Ahearne observes, Australia is one of the few countries where the word renting is always preceded by "just"!
So, we ask ourselves? Real estate, rent or buy?

But what if you were to buy a property and rent it out rather than live in it? That way you would have a foothold in the property market while enjoying some tax advantages.

Certainly the trend to remain living with your parents — and probably paying less than a commercial rent — offers many Australians the opportunity to get into the property market without too much pain. The negative here, however, is that you are reliant on the property enjoying a high occupancy rate, which in the current market may not always be easy.

In Australia your principal residence does not enjoy tax relief on interest payments. But with an investment property, not only can you claim your interest payments, but you can also amortise your establishment costs. An investment property, however, has downsides.

For instance, if you buy a property to rent out, you will not qualify for the First Home Owners Grant (FHOG) of $7000. Nor will you be able to claim it at some further time down the track when you actually do buy your first principal residence. Another negative is that any capital gain you make on the investment property will be subject to tax.

In contrast, you could live in the property as your main residence then you may for the first year and then qualify for the FHOG while being exempt from any capital gains tax liability when you eventually sold. You can live away from what has been your main residence for up to six years and still be capital gains tax exempt providing you don't claim another property as your main residence.

However, you should be aware that the anti-avoidance provisions (known as Part IV A) of the Tax Act can prevent you from obtaining tax benefits if that is the sole or dominant purpose for entering such a transaction. Make sure you get good tax advice before pursuing such a strategy.
(End of report)
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