Investing is a choice that many Australia’s will make at one point or another.
After speaking with hundreds of investors the majority of us invest to:
- Create a better lifestyle for our families
- Create a better lifestyle for ourselves.
- Take control of our lives.
- Achieve our goals.
- Reduce our dependence on our jobs.
- Achieve financial independence.
- Create a more secure future.
There are pros and cons to any form of investment, therefore its important to weigh up the pros and cons of investing in property before entering the market.
Table 1: Pros and Cons of Investing in Property
|Security||Hidden and on-going costs|
|Mitigate risk||Rent free periods|
|It’s easy to get started||Bad tenants|
|Control||High entry cost|
|Tax benefits and tax breaks||Changes to interest rates|
|More millionaires have been created through property than any other form of investment||Over supply|
|Income that grows|
|You can buy it with someone else’s money|
|You can add value|
|You don’t need to sell it to access the growth|
|It’s easier to research than stocks and shares|
|Its relatively easy to get finance|
|You can use leverage|
|Different strategies (Long term growth, positive cash flow, adding value, renovate, subdivide, develop)|
|Price is flexible|
|You can use your super|
|Its easier to hold onto if things go bad|
|Not just investors in the market|
|Demand is currently outstripping supply in Australia|
|Limited immunity from fluctuation|
|The governments got your back|
|Australia’s economy is relatively stable|
|You benefit from government and company spending|
I will elaborate on a couple of the pros and cons of investing in property a little further:
Pros of investing in property:
Property has traditionally grown in value over time. Not only can property investors benefit from steady capital growth, but they can also benefit from regular monthly growth.
You can use leverage
Borrowing to invest in property means you can get access to one of the oldest and most powerful tricks in the wealth building book: leverage.
You can borrow more when you use a property as a security compared to using a share portfolio.
Lenders will often lend up to 95% of the value of the property, whereas they may only lend up to 50 or 60% of the value of a share portfolio.
This greater borrowing power allows you to benefit from the capital growth of a larger asset.
Cons of investing in property:
Although you can sell a property if things get tough, the process is not as quick as it is to sell things like shares.
Changes to interest rates
With interest rates rising and falling owners of properties can be left in a position where they can no longer service their debt or be left holding properties with high out of pocket expenses.
The information contained in this blog is for informational purposes only. No responsibility can be taken for any results or outcomes resulting from the use of this material. While every attempt has been made to provide information that is both accurate and effective, the author does not assume any responsibility for the accuracy or use/misuse of this information.
I am not a lawyer, accountant or financial planner. Any legal or financial advice that I give is my opinion based on my own experience. You should always seek the advice of a professional before acting on something that I have published or recommended.