Why Invest In Property?
An investment property will provide you with two forms of return. History has shown that over time the property market consistently increases in value and provides capital growth in the value of the asset. While that is happening, rent will provide you with a return on your investment and provide you with income to assist you in covering interest and other expenses.
Use the bank’s money
Due to the consistent performance of property as an investment, banks and other financiers are enthusiastic when it comes to providing loan facilities. If you can contribute a modest 10% of the asset’s value, you can leverage your investment with the assistance of lending institution resources. This allows you to multiply the earning potential of your asset and can provide a growing source of future funding as the value of your property portfolio grows.
Safe, secure and insurable investment
Whilst residential property may not be the vehicle that offers the highest return on your money, it is undoubtedly one of the safest and most secure investments you can make. Unlike the stock market, for example, that experiences dramatic fluctuations from year to year, even day to day, property tends to retain its value.
No matter what is happening in the local or world economy, people always need a place to live. Whether it is to rent or to buy demand for residential property will always exist.
Tax effective investment
There are many tax advantages associated with investing in residential property. You can offset all of your investment expenses including loan interest, asset depreciation and other costs against your taxable income. This deduction, often described as negative gearing, can reduce the amount of income tax that you pay.
When eventually you sell an investment property the Australian Tax Office provides investors with a further tax break in the form of a capital gains tax (CGT) concession by allowing a 50% reduction in the taxable gain if you hold on to the property for more than 12months.
For more information about the taxation allowances and benefits associated with property and how you would personally be affected, you should seek advice from a qualified income tax expert.
Proven long-term wealth creator
As a long-term investment, it is difficult to go past property when compared to other investment vehicles. The demand for property in Australia continues to increase, not just because the population continues to grow, but also because the average number of occupants per household is declining.
The value of residential property traditionally doubles every 11 years or so, and there is no reason to expect that this will change in the future.
You remain in control of your destiny
One of the most disconcerting things about investing your hard earned money is the thought of relinquishing the control of it to someone else. This is exactly what every Australian does when they or their employers contribute money towards their super fund. In general, superannuation funds are made up of investments in a range of different stocks and bonds which spread the risk and insulate the fund owner from large losses.
Despite this, many Australians retirement nest eggs were significantly affected by the recent global financial crisis which saw the share market decline rapidly following events overseas. Investing in superannuation or shares puts the success and failure of that investment in the hands of others and at the mercy of international events beyond your control.
As a property investor, you make all of the decisions, and you remain in control of your asset and your destiny.
Daniel Otto has been a part of the property industry for over 15 years, with experience that stretches across real estate sales, investment, rental management and development.
Please reach out to him if you have any further property related questions.