How to Benefit from Government Incentives as a Property Investor

There are several government grants and schemes available for first home buyers in Australia. Let’s explore how to benefit the most from these as a property investor.

The three main grants include:

1. First Home Owner Grant (FHOG): This is a one-time grant provided by the Australian government to eligible first home buyers who are purchasing or building a new home. The grant amount and eligibility criteria may vary between states and territories, but it is generally aimed at providing financial assistance to help first home buyers enter the property market.
2. First Home Loan Deposit Scheme (FHLDS): This is a government initiative that assists eligible first home buyers in purchasing a property with a deposit as low as 5%, without the need for lenders mortgage insurance (LMI). The scheme aims to help first home buyers enter the property market sooner and with less financial burden.
3. Stamp duty concessions or exemptions: Many states and territories in Australia offer stamp duty concessions or exemptions to eligible first home buyers, which can help to reduce the upfront costs of purchasing a property. The availability and eligibility criteria for these concessions may vary between states and territories.

First Home Owner Grant:

The first home buyer grant in Australia is a government incentive program designed to help first-time buyers enter the property market. The grant is available to eligible applicants who are buying or building their first home and who meet certain criteria.

In most Australian states and territories, the grant is a one-off payment that is made to first-time homebuyers who are purchasing or building a new home. The amount of the grant varies depending on the state or territory where the property is located, but it typically ranges from $5,000 to $20,000.

To be eligible for the grant, applicants must meet a number of criteria, which include the following:

• Being an Australian citizen or permanent resident
• Being at least 18 years old
• Being a first-time buyer
• Purchasing or building a new home
• Meeting income and asset thresholds
• Living in the property for a certain period of time after purchase

The specific criteria and eligibility requirements may vary depending on the state or territory where the property is located, so it’s important to check with the relevant government department or agency for more information.

First Home Loan Deposit Scheme:

The First Home Loan Deposit Scheme (FHLDS) is a government initiative that aims to assist eligible first home buyers in Australia to purchase a property with a deposit as low as 5% without the need for lenders mortgage insurance (LMI).

LMI is typically required by lenders when a borrower has a deposit of less than 20% of the property’s value. This insurance protects the lender in case the borrower is unable to repay the loan. However, the cost of LMI can be significant and can add to the overall cost of the loan, making it harder for first home buyers to enter the property market.

Under the FHLDS, the government guarantees up to 15% of the property’s value to the lender, which allows eligible first home buyers to purchase a property with a smaller deposit and without the need for LMI. The guarantee is provided to the lender, not the borrower, and does not affect the borrower’s repayments or interest rate.

The FHLDS is available to eligible first home buyers who are Australian citizens or permanent residents, over the age of 18, and have a taxable income of up to $125,000 per year for singles or $200,000 per year for couples. The scheme has limited places and is subject to availability.

It’s important to note that the FHLDS is not a grant or a loan, but rather a guarantee provided by the government. Borrowers still need to apply for a home loan through a participating lender and meet their lending criteria. Additionally, the FHLDS only applies to certain types of properties, such as new or established homes, and may have other eligibility criteria or conditions depending on the state or territory in which the property is located.

Stamp Duty Concessions and Exemptions:

Stamp duty is a tax that is applied by state and territory governments in Australia on various transactions, including the purchase of property. The cost of stamp duty can be a significant expense for home buyers, especially for first home buyers who may be struggling to save for a deposit.

To make it easier for first home buyers to enter the property market, many states and territories in Australia offer stamp duty concessions or exemptions for eligible buyers. The specific concessions and exemptions available, as well as the eligibility criteria, can vary between states and territories.

Stamp duty concessions or exemptions for first home buyers typically include a first home buyer duty exemption or concession. This exemption or concession may apply to the purchase of either a new or established home, and can provide eligible first home buyers with either a full exemption or a reduced rate of stamp duty.

The eligibility criteria for stamp duty concessions or exemptions can vary between states and territories, and may include factors such as the purchase price of the property, the buyer’s income and residency status, and whether the property is a first home. Some concessions or exemptions may also have time limits or other conditions attached.

As a Property Investor, how do we Benefit Most from These Grants?

Here’s a great example:

Let’s say you are a first home buyer with a goal of purchasing a home in the future, but you also have an interest in property investment. You decide to purchase two investment properties, each worth $500,000, in a growing area that you believe will experience capital growth over time. You plan to use these properties to generate rental income, and you hope to sell them in the future for a profit.

To finance these investments, you put down a deposit of 10% ($50,000) for each property, and you take out loans for the remaining 90% ($450,000) on each property. You secure tenants for both properties, and they generate a combined rental income of $1,000 per week.

Over time, you watch the value of these properties increase, and after a few years, you decide it’s time to purchase your own home. At this point, you have saved up enough for a deposit on a property, but you still want to take advantage of the FHB grants available to you.

Since you haven’t yet used your FHB grants, you are able to apply for them when purchasing your own home, which is your third property. Let’s say your third property is also worth $500,000, and you plan to live in it as your primary residence.

With the help of the FHB grants, you can reduce the upfront costs of purchasing your own home, while still holding onto your investment properties and continuing to generate rental income and potential capital growth. In the future, if the market continues to grow, you may decide to sell your investment properties for a profit, which could provide you with a larger deposit for your next property purchase or other financial opportunities.

This strategy enabled me to build a lot of equity in my property investment portfolio and allowed me to roll that equity into larger investments later on. Please reach out below and we can discuss how this strategy can work for yourself also.