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Whether you are a new or seasoned investor, there are often a number of questions that come up about investing in property. Many of these are listed and answered below.

Is this a good time to be investing in property?

There is an old adage in property buying which is, "“The best time to buy a property is yesterday. The next best time to buy is today. The worst time to buy is tomorrow!”. There are always good and bad times to be buying an investment property. It’s about understanding how our market cycles work and understanding the drivers of growth that make the difference. With current interest rates, the cost to own an investment property today is very low*

*Dependant on your income and tax position

Can I buy an investment property in my SMSF?

You can buy direct property within your superannuation fund. One of the biggest advantages that having a self-managed super fund (SMSF) offers, is the opportunity to invest in property.  New legislation was introduced in 2007 that permitted borrowings to occur within self-managed super funds to invest in direct property. If you don’t have sufficient funds in your super fund to buy a property outright it is now possible for your SMSF to borrow funds for a property investment if structured in accordance with the ATO’s requirements. By taking control yourself with appropriate advice you can maximize your potential retirement benefits.

It is essential to seek out advice from a good solicitor and often a financial planner before going down the track of buying an investment property in your SMSF. Generally, there should be more than $150,000 in the SMSF before even first considering an investment property. Your fund can usually only borrow a maximum of 80% of the purchase price so the fund has to pay 20% plus stamp duty and other costs. Some types of property investment purchases are not suitable for SMSF’s. You should talk to Lime Property Solutions, about the right way to structure your SMSF before you do anything else. They can have a discussion then put you in touch with the necessary good professionals who will assist in making sure you have a compliant fund. 

Who will manage my investment property?

It is always a big mistake to try and manage a property by yourself unless you are a trained and qualified property management agent. Lime Property Solutions will always refer clients to quality managing agents in the area of your property investment. We also explain some of the insurance products that are available to ensure fully covered for any eventuality including tenants defaulting, damages etc. Lime will assist you in all aspects of purchase and management of your property investment

How do I find a good tenant?

When you buy a good quality property in a good socio-economic area, you very rarely hear of bad tenants in these demographics.

It's also important to employ a good and experienced rental agent who will ensure you get an excellent tenant.

Buying a House

What are the benefits to long term investment?

Adopting a buy-and-hold strategy is our preferred way to invest and we believe that investing for shorter time frames is less likely to generate lasting wealth. Investing for the long term will almost ensure you do not make any losses as good, well-positioned property, particularly in our major capital cities, never stays down for very long. We do see “corrections”, particularly after long periods of continuous price growth but invariably the market will surge forward again after a few years of little to no growth. 


If you are investing in property you should be prepared to hold for at least one full cycle. This may take up to 12 or 14 years. During this time the capital value generally increases. In the past, property values generally doubled every 10 years but this may no longer be the case. Over the long term, property is a very forgiving asset class and if you chose a good property investment in a good location, most property values will increase substantially over a cycle.

How much money can I borrow?

It’s always best to use the free services of a good broker. A quick phone call is all it takes to get an accurate indication of how much you can borrow. Most people new to property investment are surprised at how much they can borrow for property investment, usually a lot more than you can borrow as an owner-occupier as lenders will take into consideration the rental you will receive and also allow for some negative gearing.

What is negative gearing and how does it work?

Negative gearing is a practice whereby an investor borrows money to acquire an income-producing investment property and expects the gross income generated by the investment, at least in the short term, to be less than the cost of owning and managing the investment, including depreciation and interest charged on the loan (but excluding capital repayments). The arrangement is a form of financial leverage. The investor may enter into such an arrangement and expect the tax benefits (if any) and the capital gain on the investment, when the investment is ultimately disposed of, to exceed the accumulated losses of holding the investment. Tax treatment of negative gearing would be a factor that the investor would take into account in entering into the arrangement, which may generate additional benefits to the investor in the form of tax benefits if the loss on a negatively geared investment is tax-deductible against the investor’s other taxable income and if the capital gain on the sale is given a favourable tax treatment.

How much do you need to invest in an investment property?

Property investment is probably the most common form of long-term wealth creation. We find there are so many people who would like to invest in property but have no idea just how easy it is on your back pocket. We’ve read many articles with the titles: What will an investment property cost you? How much money do you need to invest in property? The cost of investing in property... and at the end of the article, you are as confused as you were at the beginning.


So let’s give you the answer upfront then some explanation. For most people reading this article, you need exactly $0. So is this affordable for you now? The reason the figure is $0 is that, with most clients, they are buying their first property investment after they have built up some equity in their own home. Lenders are therefore prepared to lend you the full amount of purchase, plus stamp duty plus legal fees so the actual amount of cash you require is approximately $0.00!

What is equity?

If you have one investment property or a multi-million-dollar portfolio, the chances are you have been using equity to increase your property asset acquisition. Equity is almost as good as cash in the bank and can be used in almost the same way as cash in building an investment property portfolio. Equity refers to the difference between a property’s market value and the amount of money owing on it. So let’s say your current property (investment property or home) is worth $800,000 and you only owe $200,000 on your mortgage, then you have $800,000 – $200,000 = $600,000 in equity. You can then use most of this $600,000 equity in the same way you would use cash to purchase more investment properties.

What is Capital Gains Tax?

CGT or Capital Gains Tax is the tax charged on any capital gains that arise from the sale or disposal of any asset bought or acquired after September 1985. It is not a separate tax in its own right. Rather a ‘net capital gain’ is included in your taxable income and taxed at your marginal tax rate. 


A capital gains tax event is any transaction or event that results in a capital gain upon the disposal of an asset. The term ‘asset’ includes shares, vacant land, holiday homes, business premises, or of course, a rental property or investment property. A capital gain (or loss) is the difference between the purchase price and the selling price of a particular asset. The fees for buying, such as stamp duty, and the fees for selling, such as agent’s fees, are added to the cost base.


For example, if a property is purchased at a total cost of $500,000 (including fees) and sold for $720,000 (less $20,000 in agent’s fees), the tax will apply to the $200,000 gain. There are a few exceptions to paying capital gains tax. The main one being that it does not apply to the sale of your principal place of residence – that is, your own home. Holding an investment property for more than twelve months may mean that the owner is eligible for a 50% discount on the capital gains tax payable. The above is general information on capital gains tax. If you’re considering buying or selling property, it’s advisable to speak to a good accountant that understands property before you buy.

Sidney Cityscape

I've always been told debt is a bad thing. Why should I borrow money to invest?

We would agree that non-deductible debt such as car loans, holiday loans or even mortgages are bad debt that must be paid off as quickly as possible with what you have left in your pocket after earning income and paying tax on that income. However, asset accumulation debt is something quite different. Even our wealthiest families in Australia like the Packers and the Reinhardt’s understand that ‘good’ debt, which is tax-deductible and asset producing is a tool that must be used. The wealthy get wealthier by ‘leveraging’ to buy assets that increase in value. Borrowing to invest in appreciating assets is considered ‘good’ rather than ‘bad’ debt and provides legal tax minimisation benefits. It is much easier to create wealth using careful borrowing and investment strategies compared to saving your hard-earned, after-tax income.

What are the top features to look for in an investment property?

  • Location: Definitely the number one concern. The location must have strong population growth, low unemployment, good job growth, a diverse economy. A good location, particularly in one of our larger cities, provides a lower-risk investment environment

  • Infrastructure: Best if it is already an established area with plenty of desirable infrastructures close by. If gentrification is continuing with bigger and better infrastructure programs, these always drive price growth  

  • New: ­Depreciation is a massive help to cash flow and helps to drive tax deduction. Older properties have little or no depreciation, need more maintenance, and are more costly to run. Generally, they do not demand as high a rental and are more likely to suffer vacancy.

  • The balance between yield and capital growth: A gross yield of around five percent is a good rule of thumb. This ensures holding costs are manageable and cash ­flow is manageable. It also gives you a good ‘split’ between capital growth potential and good yield. Normally one offsets the other.

  • Slightly above-average price point: ­Property should be no more than slightly above the median or around the middle of the suburb’s price range. This firstly will ensure constant tenancy and low vacancy but usually also assists when you sell as most transactions are around the median level.

Why should I avoid investing in older properties?

Basically you will find that cash flow on a new property is significantly better than in buying an older property. A new investment property around $500,000 could have in excess of $16,000 depreciation in the first year; an older property may have virtually nothing in depreciation.  Older properties can have many hidden traps leading to costly repairs and maintenance, newer properties are usually ‘guaranteed by the builder for at least 7 years against any structural problems.  Buying new has many advantages including peace of mind with lower maintenance costs, generally a higher yield on a comparable older property and they are likely to attract a better quality tenant.

Should I purchase house and land or a unit for my investment property?

In any property portfolio, we believe diversification is important. This includes the type of accommodation you purchase as your investment property. The real answer to this question, however, lies in understanding fully the selection criteria that is explained to all clients. 

One of the principal considerations an investor should make before purchasing an investment property is a consideration of ‘exit strategy’.  In other words, how will you sell this investment property when the time comes? The obvious solution is to ensure you purchase an investment property that will appeal to the most common owner/occupiers in the area in which you are investing. Census data tells us that the majority of homes in our CBD’s and fringe suburbs in all major cities now have less than 2 persons per household! Is it any wonder that the vast majority of properties sold in these areas now are one and two-bedroom units?


Surely, from an investment point of view, a one or two-bedroom unit is by far the best investment to make if you are within a few kilometers of a CBD? However, if you decide to invest in one of our outer suburbs, there is probably little demand for a one or two-bedroom unit and the obvious best investment would be a 3 or 4 bedroom house and land.

Purchasing higher density accommodation, such as townhouses or units, also help investors into more desirable locations closer to city centres. These types of property usually have higher rental yields and higher demand compared to house and land in similar locations. Understanding cash flow is also very important and we all wish to maximise tax deductions. Villas, townhouses, and apartments do not have as high a land component in the overall cost, so depreciable tax deductions are usually greater . You cannot depreciate land, only the improvements made upon it. Be aware that the land component of investment properties is subject to land tax when an investor’s properties (land value) in that state reach the tax threshold. This is an important consideration for investors wishing to build a portfolio with multiple properties.

Should I pay off my mortgage before investing in a property?

Using the advice of qualified brokers and accountants (who can all be recommended by Lime), it is much easier and quicker to pay off a home mortgage through the assistance of owning an investment property. We believe one of the biggest mistakes some clients make is waiting until their non-deductible mortgage is paid off before thinking about property investment.

Many of our parents have always suggested that if you want to retire early and be financially free, you need to be debt-free.  This statement comes from a total misunderstanding of the difference between good debt and bad debt. Would you have any idea of how much Australia’s richest man, Kerry Packer, had borrowed on his business empire at the time of his death? Money makes money!

Many of us have been brought up to believe debt is evil. I actually believe this myself when thinking about the type of debt most of us are used to; mortgages, car loans, overseas holidays, credit cards and the like. All debt that must be paid off as quickly as possible with what is left of your after-tax dollar!

As you get older, there is often a large amount of equity in the family home. Having it sit there doesn’t make you any richer, however, if you get it working you could have twice as much, if not more, on retirement. Most people spend a lifetime paying off their mortgage and when they finally do, the banks say, “Why not use that dead equity to invest elsewhere?” Instead of waiting to pay off your first home, why not invest now?

Apartment Buildings

Is there a difference between my property investment loan and a home mortgage?

The biggest difference in a property investment loan is that the interest paid on the loan is most usually tax-deductible. If, for example, you are paying $20,000 annually on interest on your home loan, then for you to pay that $20,000, it would be taking maybe as much as $35,000 or more of your current gross salary! As interest is tax deductible on an investment loan, then if you paid $20,000 interest on your investment loan it would ‘create’ a tax deduction of around $7800 per year for someone on the middle tax bracket of 37% (over $80,000 gross income per year).

This means you would only need to ‘find’ an additional $20,000- $7800 = $12,200 to pay the interest. This would normally be covered by the rental received from the investment property. There are few differences between what you need to do to borrow for a property you’ll live in and for one you’ll rent out. The most common difference is that a property investment loan is almost always on interest only while your current home loan is most commonly principal and interest.

Do you have to be wealthy to consider investing in property?

Anyone with some reasonable equity, (we recommend usually around $120,000 + depending on individual circumstances), or a deposit of around $50,000 and a reasonable joint income of around $120,000, most can usually invest in property with reasonable comfort. Rental income and the use of negative gearing to reduce tax means many people find their investment property more than pays for itself, or results in minimal out of pocket expense for the investor. Many Lime clients have an annual income of less than $70,000.

What is the advantage of using a property investment company? Why not just DIY it?

There are many advantages to using the services of an expert property investment company. The first advantage has got to be the fact that you are working with a professional investment company that just happens to use property as their preferred investment class. As property investment professionals, you are given access to free property investment education and free research. Apart from these two major factors, there are many pitfalls even experienced investors meet. A company like Lime will ensure you are fully in control and fully understand all steps you take in purchasing and managing your investment property.

All successful investors have a good and experienced team of professionals around them including tax advisors, brokers, and solicitors as well as property research experts. Lime will ensure we help you build this team around yourself. Real estate agents earn a commission based on the sales price of the property they sell, generally only in the area in which they are based. They can give excellent service to anyone who is looking for accommodation in the small geographic area they serve. It must also be noted that, by law and ethics, a local real estate agent’s interest and loyalty is with the vendor, not the buyer/property investor. Lime Property Solutions focuses solely on the interests of the property investor and are there to offer clients a full property investment support service. Lime will negotiate the best possible benefits and price on the property investment for every client.

Can you ever move into an investment property in the future?

The simple answer to this question is that your investment property belongs to you and you can do what you want with it as you can with your own home. There are people who buy property investments with an aim to move in themselves at some stage although this is NOT a strategy we would encourage. Your future dream property may not necessarily be a good investment and trying to kill two birds with one stone (buy a great investment and a dream home for the future) is often a very risky strategy.

Always, it is best to invest in an area with the highest possible potential growth. Specifically, we are investing to make money! Seldom do we find that the dream future property has all the attributes of a great investment. Of course, by sticking to buying great investment property, you will soon have the funds to buy that dream property to live in! Lime can always advise about whether the area where you want to live in the future is an area of solid capital growth and the type of property in the area that is most likely to make the best property investment choice.

What is a depreciation schedule and do I need one?

This is the primary area in which buying new investment property makes such a huge difference as there can be very large depreciation on a new property investment but virtually no depreciation on an old property investment. The simple answer to the question is that a depreciation schedule (outlining the costs of all depreciable items) is a necessity and you must have one. The schedule is a one-off purchase (always organised by Lime Property Solutions for their clients at a very large discount) and the purchase is 100% tax-deductible.

A depreciation schedule is an accounting procedure for determining the amount of value left in a piece of equipment. There are several methods for calculating depreciation, generally based on either the passage of time or the level of activity (or use) of the asset. When a quantity surveyor completes an investor’s capital allowance and tax depreciation schedule, two main elements are generally included:

  • Capital works deduction (division 43 – building materials) and

  • Plant and equipment  (fixtures and fittings – division 40).

These two “divisions”, 43 and 42 are treated differently by the ATO.

Capital Works Deduction:

Also known as building write-off, this is a deduction available for the structural element of a building including fixed irremovable assets. Residential properties built after the 15th September 1987 are eligible to claim this deduction of 2.5% over the Australian Tax Office (ATO) specified life of the property – 40 years.

Plant and Equpiment:

The plant and equipment depreciation deductions are available for removable assets. Plant and equipment assets are identified through ATO legislation as assets which have a limited effective life and can reasonably be expected to decline in value over the time they’re used.

Depreciation benefits vary depending on the type of building, its age, its use and its fit out. Commercial, industrial and residential investment properties can all claim depreciation based on either the diminishing value or prime cost methods of depreciation. The prime cost method is the more common method to be used by your accountant for the average property investor as it allows acceleration of deductions in the first few years. It is very important to note that you can’t switch between methods of depreciation so it’s always best to consult with your Accountant to work out the best method to suit your investment strategy.

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