How to Invest in Property?
Property in Australia has a proven long history as an Investment that delivers consistently high returns over the medium to long term.
In fact Property values generally double every 7 to 10 years
Property Investment provides a secure form of protection against inflation and has proven to be less risky than other investment strategies such as share market trading. The Government likes you to own Property investments as it also provides effective avenues for Investors to minimise the level of tax they pay.
Property is a tangible asset that you can see, feel, control and add value to. Banks are often happy to lend against property up to 95% of its value, or higher depending upon your individual circumstances. Property will always be in demand as our population continues to grow, whether it be to rent or to purchase, ensuring a consistent ever increasing return on your investment
Growing Income stream
The rent comes in every month so you do not have to wait for interest or dividends. This consistency of cashflow is a major benefit. As a Property Investor you have the ability to increase the rent periodically. Over the years the rental income received from property investments has increased at a rate that has outpaced inflation.
Capital Growth
Well located property has approximately doubled in asset value every 7 to 10 years since the 1960’s. As the property improves in value, you can access the growth in your equity to purchase more properties. Unfortunately the Capital Growth in Property Investments is not a consistent thing so it is important that you understand how the “property cycle” works. Our video course explains how you can take advantage of these cycles.
Tax Benefits
There are several tax benefits available to property investors. Property investors are able to take advantage of a range of tax benefits including tax deductions and depreciation allowances. One of the tax advantages with borrowing to purchase an Investment Property is that you can claim a tax deduction on the interest charged on the loan. Also any legitimate expense incurred in running your investment property should also be tax deductible. These include travelling to your investment property to collect rent or money paid to a property manager to manage your property on your behalf.
The other area of tax benefits is called depreciation. Depreciation of the building may also be claimed as a tax deduction. Buying brand new or a relatively new property allows for the greatest amount of depreciation. Claiming building depreciation is a clever way to increase your cash flow.
You should never buy property (or any investment) just for the tax benefits. Getting a tax benefit should be a bonus, but a bonus that can make it all worth while.
Liquidity
A common misconception with property is that it is not as liquid as shares. However, you don’t need to sell your property in order to get cash out of it. With shares you generally must sell them to be able to access your gains and when you do, you’ll pay tax and brokerage fees.
With property, you can simply get a line of credit against the equity you have built up, thus avoiding tax and real estate agent fees. This essentially makes property more liquid than shares and especially superannuation, where you can’t access the money until retirement.
Security
Once the property management and tenant are in place, the result is predictable. The money comes in every month from your property manager. This is certainly better than watching the stock market for when to buy and sell or awaiting annual profit results and/or dividend payments. Even allowing for the ups and downs of real estate values that we hear about, the underlying trend of property prices has been steady growth.
When it comes to a secure investment just ask the banks. Banks have always recognised property as an excellent security and the reason they’ll lend you up to 80% of the value of your property is that they know property values offer great security over the long-term. In fact, the entire Australian banking system is underpinned by the continual growth of residential property.
Most forgiving of Investments
Even if you bought the worst house at the worst possible time, chances are that it would still go up in value over the next few years. History has proven that real estate is possibly the most forgiving investment asset over time. If you are prepared to hold property over a number of years, it’s bound to rise in value. There’s really no other asset class quite like property.
Now with a new property cycle working its way around Australia, it the time for you to catch the property wave too. Remember, there’s nothing wrong with seeing what successful people do and applying those principles to your own life. If the majority of extraordinarily wealthy people have used real estate profitably, there is no reason why you shouldn’t also.
You are always in Control
Property is a great investment because you make all the decisions and have direct control over the returns from your property. One of the main reasons people decide to invest in property rather than shares is that they have greater control over their asset. For example, if they want to receive a higher rent, they can upgrade the property. If they want to increase the value of their property, they can renovate, landscape or possibly even sub-divide and create new allotments.
Sure you need some of your own money but the ability to use leverage with property significantly increases the return on your investment capital and, importantly, it allows you to purchase a substantially larger investment than you would normally be able to.
You can touch it
There is a sense of pride and achievement when you start building an Investment portfolio. Often people like to invest in property because they can see it, touch it, feel it and drive past it. For many people, investing turns out to be an emotional decision rather than one based on pure numbers and these are the sorts of emotions that make people feel better about investing in property.
We would like to ensure that any investment that you make is designed to achieve your financial goals, and that you are taking advantage of the property cycles.
The 2 most common questions that we are asked is “Why should I invest in Property?”, and “How to Invest in Property?”
Hopefully the reasons for investing in Property are now clear. To learn How to Invest in Property, simply email us to schedule an appointment to get started.
