Many astute property investors buy multiple properties, not to live in, but as a form in investment. They let these properties at amounts either equal or in excess of their monthly home loan repayments, thereby making a financial profit and accruing a substantial fixed asset portfolio.

One advantage of this type of investment is that your monthly home loan repayments remain fixed for a pre-determined period of time (i.e the length of the home loan period), however rental amounts do keep pace with inflation. This means that as a medium-term investment within a 5-7 year period you could be earning considerably more from your property rental than the property is costing you.

The major disadvantage of this form of investment is that property insurance, maintenance and commissions to letting agents are direct costs related to rental property.

Rental income derived from an purchased property is taxable and must be included in the taxpayers “gross income”. An overall tax deduction can be claimed for any general operating expenses including interest costs, rates, commissions and administration fees for the property, however, no income tax deduction can be claimed for the cost of acquisition of the property, improvements to the property and transfer costs.

This form of investment has both pro's and con's so be sure you consult your accountant or seek professional legal advice before embarking on such an investment venture.

On the sale of the property, CGT (Capital Gains Tax) is levied on the difference between the base cost of the purchase and the proceeds from the disposal of the asset.

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