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Australians have been investing in property for years and have gained considerable wealth as a result of property values increasing in both metropolitan and regional areas. It’s not surprising that it’s a popular investment option. In fact, it’s hard to go past a real, tangible investment you can touch and feel.
If you’re thinking about investing, the keys to success start with understanding your options and being comfortable with your overall investment strategy. These two aspects form the basis of a relaxed and worry-free investment journey that means you can sleep at night. And this right here is why property investment makes sense on so many different levels.
Here are five reasons why you should consider property as part of your investment strategy.
1. We all ‘get’ property – it’s easy to understand
Most of us know what makes a home a good buy. Location, transport, schools, and infrastructure are all things we consider when house hunting. But how many of us know the intricacies of investing in other asset classes such as shares?
Unfortunately, it can take a lot of time and effort to make solid investment choices in unfamiliar territory. And a lack of understanding can bring on the worry wobbles that come with market movements.
2. Comparing is simpler
There’s plenty of subjectivity in the way shares are valued. And this value can change from day to day, so it can be difficult to compare different options.
With property investment, you can compare multiple properties by value, income, growth, location, demographics, and recent sales. These are tangible ways to determine the fair value of a property and whether there’s opportunity for growth.
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3. Add value to your investment
Let’s face it, you’re not steering the ship when you invest in large corporations. But you do have a certain level of control with property investment. Yes, there are some variables you have no control over. But there’s also plenty of ways you can add value to your investment.
Whether it’s cosmetic improvements, minor renovations, or house extensions, you can grow your property’s value in ways that aren’t reliant on current market conditions. And where an unfortunate share investment can dwindle away to nothing, most homes carry a reasonable level of tangible value.
4. Enjoy the benefit of income and capital growth
It’s easy to focus on the rental income you receive from an investment property, but don’t forget the capital growth that’s happening behind the scenes with no effort at all. Properties in Australia have increased an average of 7.25% per year for the last 30 years. Sure, there are corrections from time to time, but property was never meant to be a short-term thing.
5. Take advantage of tax
Property investors enjoy a number of tax breaks that relate to the property and any associated loans. The most popular tax break is negative gearing, which involves claiming any expenses (including loan interest) over and above the income you receive from the property. This claim reduces your taxable income and tax liability.
Investors are also able to claim depreciation on various assets within the home. You’ll usually find the claimable amount is higher for newer properties. Like most investments, if you’ve held the property for over 12 months and you decide to sell – you’ll receive a discount on your capital gains tax.
We’ve seen property prove itself time and time again, but the best investment strategy is one that’s developed entirely for you and your needs. Speak to your Yellow Brick Road mortgage broker to find out how property investment can help you build wealth for the future.