FAQs & Glossaries

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investment questions right here.

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18th Sep
What is capital gains tax?

Capital gains tax is a tax you pay on the profit you make when you sell certain assets, like investments or property. Here’s a breakdown:

  • Profit: Imagine you buy a share of stock for $100 and later sell it for $120. Your profit, or capital gain, is $20.
  • Taxed Profit: Capital gains tax applies to the profit you make from selling the assets. In this case, the $20 you made will be taxed.
  • Assets: This can include things like stocks, bonds, and real estate.

You’re paying tax on the money you earned from selling something, not the total amount you sold it for.

Here are some key points to remember:

  • You don’t pay capital gains tax if there’s no profit: If you sell an asset for less than you bought it for (a loss), you generally don’t owe any capital gains tax. You can use this loss to reduce the amount of any capital gains tax you may pay in the future.
  • Rates can vary: In real estate, the capital gain is effectively added onto your income and treated as an income tax.
  • Some exceptions exist: If you have held the asset for longer than 12 months you get a 50% concession. This means the CGT you must pay is cut in half.
18th Sep
What is negative gearing?

Negative gearing is simply a tax deduction. Property usually provides you with an income (in terms of rent) as well as a range of costs. If the costs are greater than the rent you receive, then you have made a loss (in terms of cash flow). Negative gearing allows you to reduce your income at tax time by the amount of the loss you made. This lowers your income tax, and you typically get the difference back in your tax return.

The costs that you incur are things like interest expense, strata fees, property management fees.

You can also claim depreciation on the structure of the building itself and the fittings inside such as the cupboards, blinds, carpet, and any repairs and renovations that may be required. This is because the tax department recognises that there is a finite lifespan on these items, and they wear out over time. As such the value of them reduces over time.

The tax savings can add up to a substantial amount over the course of a year. A property can also be positively geared. Where your rental income is greater than the cost to hold the property. In this case the additional income is added to any other income you make and is taxed at the appropriate marginal rate.

18th Sep
What is Lenders Mortgage Insurance (LMI)?

Lenders mortgage insurance is an insurance that protects the lender and not you. Most people purchase LMI to lower the deposit required to purchase property. The insurance protects the lender in case the borrower is unable to continue paying for the loan and the property needs to be sold quickly, for less than the outstanding loan balance. It can be a useful tool for getting into the property market more quickly or for taking on a bigger loan (using more leverage).

18th Sep
What does off-the-plan mean?

What is buying off the plan? Buying off the plan means buying a property that hasn’t been built yet or is still under construction. You make your decision to buy based on the building plans and designs, rather than the finished product.

18th Sep
What is stamp duty?

When it was introduced in 1865, stamp duty was literally an administrative cost for a government clerk to stamp a piece of paper. At the time it cost the equivalent of a few cents. Nobody is sure how it ballooned out to tens of thousands of dollars today, especially since there isn’t even a stamp anymore. Today, it is just another form of revenue for the state governments. It isn’t just a tax on houses, it can arise from the sale or transfer of a wide range of assets.

18th Sep
What is strata?

Property in Australia is typically split into two types of ownership, Strata-titled property, and Torrens-titled property. Strata titles are usually for medium and high-density dwelling types such as townhouses and apartments where there are common spaces shared by all residents of the complex such as the roof, the structure of the building itself as well as things like footpaths or swimming pools and gyms.

Strata title is a model of property ownership that allows individuals to buy ownership of a larger property or building. As an owner of a ‘lot’ within a ‘Strata Complex’, you own your lot as well as a share in the ‘common property’. There is usually a quarterly strata fee that covers the cost of maintenance of the shared spaces.

18th Sep
What are rental yields?

Rental yield is a simple metric that allows investors to get a quick estimate of the income you would receive for the amount you are spending on a property. It is calculated as the total rent you would receive in a year, divided by the current price of the property. This is expressed as a percentage. The higher the yield, the more income you would make for the given price of the investment.

Rental yields can also give investors a guide to the value of property and allow them to compare how good one investment may be compared to another. They can be compared to the price/earnings ratio (PE ratio) in the share market. It is one of two types of return you get from property, the other being capital growth.

18th Sep
What is depreciation?

When you have a physical asset that deteriorates over time like a house, this is known as depreciation. As the asset ages, its value declines. This is recognised by the Australian Taxation Office (ATO) and investors can claim tax deductions on both the decline in value of the building’s structure and items considered permanently fixed to the property. This includes ‘plant and equipment’ such as ovens, dishwashers, carpets, and blinds.

The most practical way of determining how much you can depreciate is by purchasing a depreciation schedule from a reputable company. There are set calculations by the ATO which specify the amount by which each item can be depreciated.

18th Sep
What is rentvesting?

Rentvesting is a home-owning strategy where you rent a property to live in that’s right for your lifestyle, while you own an investment property that’s right for your budget. As home prices in inner-city areas have gone up, this strategy is increasingly popular, especially among younger buyers. It can be a more effective way to use your income because rentvestors are typically able to own a bigger asset than had they purchased a house to live in.

18th Sep
What is homevesting?

Using the equity on your home as a deposit to purchase another property.

10th Feb
How long has your business been opened?

Our CEO and Founder, Dr. Tony Hayek, opened Blue Wealth’s doors back in 2009 when he realised there was a considerable gap in the property research market. He has over 25 years of experience in the property world and is passionate about giving everyday Aussies access to the high-level knowledge needed to make good investment decisions.

10th Feb
Are you a Buyer’s Agent or Real Estate Agent?

We are legislated under the Real Estate Act, but unlike a Real Estate agent, we are very selective about the properties we sell. We don’t sell anything that doesn’t pass our research methodology, which has a 89% rejection rate over 5 years. We are also not a Buyers Agent because we don’t ask our clients where they want to buy. We simply research the market for the best opportunities and then give our clients access to it. Visit our research page for a breakdown of how the research methodology works.

10th Feb
What does it mean ‘89% rejection rate’ for your property selection?

Blue Wealth’s independently audited research methodology ensures that properties that do not pass the stringent 112 point check will never be presented to a client. This research has rejected over 89% of properties reviewed over the past 5 years, ensuring the remaining 11% of properties represent the best investment opportunity. This ensures that they have the best chance of attracting good tenants as well as good capital growth.

23rd Dec
What are your thoughts on buying and renovating for profit?

Renovating for profit has been popularised by reality TV shows and can be a great way to add value to an older run-down property. However, the margins are usually slim and if you find an older building has asbestos or requires structural repairs it can quickly add to the cost of the project. The best properties to renovate only require cosmetic renovation. Paint and flooring usually give you the highest ROI.

In addition, most people don’t factor in their own time and skill when doing these renovations and those hours can add up quickly, eating up all your spare time while the building remains untenanted. Now we’re at the beginning of an upswing in the market, it’s a no-brainer to simply buy something and watch as the prices go up.

23rd Dec
Why do you guys only sell/recommend off-the-plan properties and not properties that are already built?

Off-the-plan property is by definition ‘new’ – the main benefit of buying a new property is it costs less to hold.

There are a few reasons for this:

  • Depreciation benefits make your investment more tax-effective. See Brad’s article here for what depreciation is and how much you can get back.
  • The builder’s warranty is still available for 6 years in case there are any defects in the build.
  • New property tends to have lower maintenance costs.
  • New properties attract more tenants, who are often prepared to pay more rent.

Off-the-plan also allows you to pick the best apartment in the complex our house in the estate, because you’re getting in first. In most cases buying off-the-plan through Blue Wealth will give you access to a range of negotiated inclusions that will make your investment journey smoother.

23rd Dec
How do I find a good mortgage broker?

Finding a good mortgage broker can be tricky, you can’t usually tell which ones are good through an internet search. Blue Wealth doesn’t have an in-house mortgage broker, but we do work with a lot of them.

We ensure that our values are aligned before referring anyone to them. We are happy to point you in the right direction if you need any help in this regard.

23rd Dec
Do you help with property management?

Yes! Our property management tea, works tirelessly with our approved property managers to make sure our clients are well supported after they settle their property. They are here to help with any questions about tenants or property management.

23rd Dec
How do you measure property value?

By technical definition value is defined as ‘the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction…’

From a bank panel valuer perspective, it would be based on the recent sales prices of similar properties. This is necessary to get a loan.

From a macro investment perspective, we can measure levels of relative over or undervaluation of a market based on a variety of metrics such as exponential regression and a time-series analysis of rental yields. We also have a property cycle model that is backtested over 60 years.

Typically we use a combination of the above techniques in order to determine relative value.

23rd Dec
How much do you charge your clients?

We don’t charge our clients; we charge the developer to sell their property. Blue Wealth is legislated under the Real Estate Act, which states that we must act in the best interest of the party that pays us. Legally we must act in the developer’s best interest. So how do we make sure that our clients are buying the best investment?

Enter the Research Model and the Blue Wealth Index.

Blue Wealth’s independently audited research methodology ensures that properties that do not pass the stringent 112-point check will never be presented to a client. This process has rejected over 89% of properties reviewed over the past 5 years, ensuring the remaining properties are the best investment opportunities that we can find. Often these will come with negotiated discounts or other incentives but most importantly, clients will never be able to buy the same property cheaper from the developer or anyone else.

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