Why Invest in Property?

Many first home buyers choose to invest in property before buying their first home. This is because of the many benefits it offers. By releasing equity, you can even invest in shares, bonds or a business. Property investment can help you quickly build your investment portfolio. However, investing in property without careful consideration can result in heavy losses. Find out why people invest in property and how you can too.

Is it a good idea to invest in property?

Property investment can potentially produce greater returns than other investment options. However, that’s only if you know what you’re doing. There are many benefits to investing in property. The main reasons why people invest in real estate include: • Return on investment: You can get constant returns through rental yields of investment properties. If these returns are higher than the mortgage repayments, the property will be paying off the mortgage itself. Investors, especially first-time investors, can benefit significantly from this. If you’re looking for high returns of up to 12%, you might want to consider investing in Special Disability Accommodation (SDA) that is offered by the National Disability Insurance Scheme (NDIS). • Security: You’re more secure with a relatively fixed return if you invest in property. The stock market has a higher risk in comparison. Also, market volatility is reduced because of the relatively long amount of time it takes to liquidate a property asset. • Tax benefits: Property investment can provide various tax benefits. If your interest and other costs are more than your investment income, you can take advantage of negative gearing benefits. You can claim a tax deduction for depreciation in value of your investment property. Also, you can apply for a Tax Withholding Variation through the Australian Taxation Office (ATO). This will allow you to receive a tax break each time you receive your salary instead of waiting for 12 months. By saving on tax, you can use the money to invest in property all over again. • Growth: The property growth rate in Australia has been steadily increasing. If you buy in a good location, the value of your investment property can rise substantially. You can enjoy capital growth even after your retirement. The property can also be a great gift to your children or your grandchildren. • Getting finance: Mortgages for properties form a major part of any lender’s loan products. It’s relatively easy to secure finance to invest in property. There are many investment loan options for commercial properties as well. After you have a property under your belt, it can help you secure additional finance. You can use existing equity to secure other loans and buy even more property.

The right amount of research

Doing too little research is likely to lead to an underperforming property. Even worse, it can lead to a money-losing investment. This is because even if a location or property may seem good on the surface, it may not truly be so. You can research online or visit the property yourself to find out if it’s a good investment. It’s recommended that you try to verify your research and stats. On the other hand, doing too much research may stress you out. When you over-analyse things, you may not be able to take action. You can also lose out on the property if you spend too much time researching. A great way to research just the right amount is to have a structured approach. Create a research checklist and follow it through before making a decision. Also, note that investors that sit on their research tend to lose out on good opportunities.

Where to invest in property

Familiarise yourself with the area and property market before you invest. If you’re planning on investing somewhere new, think twice before you make a decision. You can look for areas with high growth projections and rental income. Reports and stats for this can be found online. Recent sale prices can help you get a price estimate. It’s also a good idea to check out the vacancy rates in the area. More vacancies mean higher difficulty to sell the property. What type of investment property should I look out for? First-time investors can look for properties that appeal to a wide range of people. Specialised properties such as petrol stations can be quite tricky. However, more experienced or professional investors can use their knowledge to invest in them. Check out for properties with low maintenance costs. Inner-city units can have lower maintenance costs than normal houses. However, your profitability depends hugely on your research.

The Ongoing Costs of Investing in Property

If you invest in property, you should watch out for these ongoing costs: • Rates and levies: You may need to pay council rates such as the water bill if you buy and let out a residential property. If you invest in a strata title or apartment, you may have to pay levies to the corporate body that maintains the building. • Maintenance costs: This includes all costs associated with repairs and maintenance of the property. Note that these costs are tax-deductible. However, improvements to the property such as paint jobs or new fittings won’t receive tax benefits. • Insurance and agent fees: This includes costs of insuring the property as well as fixtures and other contents. If you have an agent, you’ll need to pay them as well. • Interest: Principal and interest must be paid if you didn’t buy the property with cash. However, a positively geared property will pay this off itself.
Dual Keys might be a great, cash-flow positive, addition to your portfolio, to help you grow your income and keep your portfolio in balance. If you need more information, call us today!

source: homeloanexperts