If you’re an investor who is worried about getting involved in Real Estate – you’re not alone! I can totally understand why some first-time investors get nervous. They’ve heard ALL the disasters stories that their friends, family, work colleagues and general acquaintances have experienced, and now they’re wondering – what if this happens to me too?
Believe me when I say that in most of these cases, the investor in question has not been prepared fully, has failed to do the right research, and has often lacked a strong team of Property Superstars to help them through the process!
I guess what I’m trying to say is yes, there is risk in everything we do, however some risks can be mitigated through the simple process of educating ourselves appropriately.
In the end, it’s important to remember that if you do your research, practice due diligence and have the support of key people along the way, your investment is more likely to succeed than not! Well located residential property has an unequalled track record of producing consistent capital growth.
Still not sure if you should invest in Residential Real Estate? Here are my top reasons why you should be saying YES!
- It’s Safe
Research conducted by AMP found that Australian property has increased at a rate comparable to the share market since 1926 – on average, 11.4% per annum. Property is preferable over the share market as it is less volatile and an all-around safer investment.
- It’s Easy To Learn
Property is relatively easy to learn about. If you find reliable sources, all necessary education is available. Concepts are easy to comprehend and apply to your own situation.
- It’s Easy To Get Finance
Although sometimes it might not feel like it when it comes to applying for your own mortgage, lenders really do like property! Home loans form a major part of a bank’s business model, and statistics show that lenders are more likely to provide finance for residential property than for any other assets – with some offering up to 95% finance, and with lower interest rates than any other type of loans.
- It’s Flexible
Property is one of the most flexible investments you can make. Regardless of what your financial situation and goals are, there is an investment strategy out there that will suit you.
- You Have Control
When it comes to investing in property, you directly own the asset and have complete control over it. This means you can influence both asset worth (by adding value) and cash flow (e.g. by raising the rent) directly. Compared to the share market, where you often need a broker to handle your trades for you, property is a significantly easier asset to manage.
- You Can Add Value
There are a number of ways you can increase the value of your property, the most popular of these being renovation. Even small-scale renovations, such as re-painting and landscaping, have the ability to add value to your investment. Larger scale projects, like kitchen remodelling or even removing walls, can add double, if not triple your renovation investment to the value.
- There’s An Investment For Everyone
Regardless of what your financial situation is or what your budget is, there is a property out there suited to you. There is a common misconception that property is unaffordable for most Australians, however, this is untrue. Sure, not everyone can buy in the prime suburbs of Sydney or Melbourne, but there are many regional towns and cities, cheaper capitals and suburbs away from the city that offer affordable entry points.
- You Can Negotiate
When it comes to purchasing most other assets, such as shares, you have no other choice than to buy it for the market price. Property, on the other hand, has more room for negotiation. If you’re well versed in the art of negotiation, there’s massive potential to get a good deal in price.
- Tax Benefits
Come tax time, there are a number of ways property can be advantageous. For example, negative gearing allows you to write off investment expenses against your income. As well as this, you may also benefit from depreciation, which is the decline in value of the property, fixtures and fittings – sometimes this makes the difference between a property being negatively geared and paying for itself.
- You Can Invest Using Your Super
Using a Self-Managed Super Fund is one way you might like to invest in property. Capital gains tax on property purchased through a SMSF is 0% if you’re over 60.
- It’s A Tangible Asset
Remember that your property is a physical construct – if anything happens in your life, you can move into the property either long term or short term, and then move out again when things return to normal (of course taking into consideration rental agreements and current tenants).
- Others Contribute To Your Investment
Firstly, when financing your investment, you only need to have 5%-20% of the value of the property as a deposit, the rest you can raise from grants or from the bank, depending on your ability to service the loan. Then, when renting out the property to tenants, their rental payments will contribute to or in some cases completely cover the mortgage repayments. Add these factors to the tax benefits you will receive and you’re getting 3 separate parties help contribute to your investment!
- Australia’s Economy Is Solid
While there may be some short-term problems over the years, as a whole, Australia’s economic future is fairly solid. The country’s population is projected to reach at least 30.9m people by 2056, meaning demand for housing is going to continue to grow. The resources boom is also expected to continue over the next few decades, continuing to increase the value of properties in certain areas – that’s where doing your research is a must, so you know what locations to look at buying in!
- Government Incentives
The Government offers incentives such as the First Home Owners Grant to encourage people to purchase property. These grants can range from $7,000 – $20,000 depending what State or Territory you live in!
- It’s A Long-Term Investment
Depending on the reasons why you have purchased the property, you might like to hang onto it and pass it down to your children. The investment will continue to grow – you don’t have to think about it in terms of your lifetime only!
- You Can Be As Involved As You Want
If you prefer to sit on the sidelines and let others get their hands dirty instead, good news – nearly everything relating to the property industry is outsourceable! This includes buyer’s agents, builders, property managers and more. Hiring professionals is sometimes the best way to ensure you are getting the most out of your investment. On the other hand, if you prefer to do it yourself – whether that be researching properties, being an active landlord or DIY renovations – it’s completely possible! When it comes to your investment you are completely in control and can decide how involved or uninvolved you want to be.
Still have questions? Feel free to leave a comment below!
Until next time,
Sasha.
