Ch.8 - 2010 Reed International Books Australia Pty Limited...

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© 2011 LexisNexis Australia 1 Financial Planning in Australia 4ed – by Taylor, Juchau, Houterman Solutions by Michelle Cull CHAPTER 8 INVESTING IN PROPERTY AND COLLECTABLES Solutions to Questions Question 1: How does the decision to invest in property differ from the decision to purchase a home to live in? What factors need to be considered before investing in property? The decision to invest in property is often very different from the decision to buy a home. Investing in property is much less personal than buying one’s own home and the decision is usually made based on the ability of the investment property to provide substantial returns rather than on aesthetic appeal or lifestyle. Additional factors to be considered when purchasing an investment property include: taxation implications for rent received, GST, capital gains tax, land tax, stamp duty; maintenance and upkeep costs; property management of tenants; impact on entire investment portfolio to manage risk and return; taxation deductions for interest on borrowed funds; medium to long term to return a net capital gain; substantial funds required; relatively illiquid; zoning, planning and leasing arrangements for commercial property. Question 2: What are the main disadvantages associated with investment in property? Changes to government taxes over the years have made investment in property less attractive; for example, capital gains tax, land tax, stamp duty, GST. Costs such as legal fees, conveyancing costs, agents’ fees Medium to long-term investment is required to return a net capital gain. Commercial property involves issues such as zoning, planning and complicated leasing arrangements. Property is a relatively illiquid asset. Usually requires a substantial amount of funds to invest. Need to thoroughly research and understand the market. Property may require continued maintenance. Management of tenants may be difficult. © 2011 Reed International Books Australia Pty Limited trading as LexisNexis. Permission to download and make copies for classroom use is granted. Reproducing or distributing any material from this website for any other purpose requires written permission from the Publisher. © 2010 Reed International Books Australia Pty Limited trading as LexisNexis. Ancillary for Financial Planning in Sustralia 4ed - Taylor, Juchau, Houterman
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© 2011 LexisNexis Australia 2 Maintaining loan to value ratios (LVRs) to satisfy financing requirements. © 2010 Reed International Books Australia Pty Limited trading as LexisNexis. Ancillary for Financial Planning in Sustralia 4ed - Taylor, Juchau, Houterman
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© 2011 LexisNexis Australia 3 Q uestion 3: What factors need to be considered when investing in art? Your investment strategy — capital appreciation, income producing or both?
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This note was uploaded on 01/10/2012 for the course FINS 3616 taught by Professor Curry during the Three '10 term at University of New South Wales.

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Ch.8 - 2010 Reed International Books Australia Pty Limited...

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