Why Invest in Property?

Why Invest in Property?

Just joined us? Curious as to what the hype is? Never fear – these are the reasons Property is one of Australia’s favourite investment vehicles.

You’ve seen it all over the news, heard it from friends and family, property investment is one of the most common investment strategies that exists.

But what is with all the hype? Why do people choose property. What do you need to now? What are the benefits?

Well, many, but here are some of the biggest benefits for Property.

It’s Easy

It isn’t rocket science, not at all. To learn the craft, you don’t need a degree either. You don’t need specialist knowledge at all, just the tools.

Research is relatively minimal

Compared to things like the stock market, which requires a huge amount of research and in-depth knowledge, managers and analysts to look after, the Property Market is relatively simple.

Compare the two. With the Stock Market, you’ll need to trawl financial papers, reports, AGM releases, company releases and much more, as well as hire brokers and fund managers which can be a costly investment for a non-secure gain.

Property on the other hand, requires you, to search for property, research statistics on REA and Domain, and employ a Property Manager to manage the property (for a very minimal cost).

There is research and strategies to minimise risk in Property much like the Stock Market, but the difference is that the Stock Market depends on many different uncontrollable values, whereas a bulk of the control in Property is with you, and the Tangible asset you can view and mold.

Finance isn’t hard

Getting a mortgage is as easy as passing some documents over to a guy you sit down with for perhaps an hour. Easy. Home Loans are probably the most important facet of any financial institution, and will loan you far more (up to 95%) than they would to any other investment vehicle.

You can also leverage your property as security, to then grab yourself another property. With the right strategy, it’s as simple as it sounds.

Control is yours

Property is 100% in your control. In the sharemarket, you’ll often hand over control to some professionals or fund managers to look after and handle your trades.  The values though are dependent on the company you’ve bought shares in, and can be very volatile.

With Property, control is largely in your hands. The asset itself is tangible, and any potential growth can come down to your choices. For example, you can subdivide a block, develop a block, or even renovate a block. These tools are ways you can increase the value yourself, without external factors influencing the prices heavily.

You can also use the asset. You can live in it, have relatives live in it, move in or out at your own leisure.

You often aren’t paying for your own investment

In many cases, when renting the property out, somebody else is paying for your investment. Because you are borrowing most likely a majority of the price, you aren’t outlaying overly much in terms of actual physical capital. But the repayments are often covered by your tenants.

Tax Benefits are yours to take advantage of

With property investments, one of the most powerful tools (apart from the leverage) is tax breaks. The first of theses is the much maligned ‘negative gearing’ – which allows you to write off investment expenses against your tax. More often than not, this will offset any shortfall between your rental income and the actual costs of the property itself.

Depreciation is another hidden gem of property investment, which is the value decline of the property, fixtures and fittings over a set period of time. This can amount to a large sum of money, but depends on the age and types of fittings. Many investors dismiss depreciation, it would be wise to get a proper schedule set up and in action.

Super Superannuation!

Superannuation is another way to invest in property, which can turn a hobby or income into the rest of your life.

Changes in laws have made a Self-Managed Super Fund Property Portfolio a more feasibly option. Tax benefits are the name of the game, with Capital Gains Tax at 10%, and zero when you reach 60. There are a lot of rules that govern self managed super funds and property, namely you cannot live in it, however you can renovate it.

Definitely get advice if you look down this route.

Author

Michael Turner is a Property Development and Analytics Specialist operating in Sydney’s Growth Centres and corridors. He is a Director of YPI, along with several roles at property development firms and agencies. He can often be heard on various radio mediums talking about Football and Property. You can find him on Twitter @mturnerypi or email him directly at m.turner@youngpropertyinvestor.com

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