As young investors we often want to rush into the market and buy the first property that suits the lifestyle we want to live.
Sometimes its good to take a quick step back and look at the benefits and risks of investing in property.
The major reason many ordinary Australians invest in property is that historically property values have gone up over time. In fact over the last hundred years they have gone up by an average of 9%+ per year. The added benefit of investing in property is the weekly rental returns.
‘A safer investment’
Property is the only market in Australia, which is not dominated by investors, resulting in a buffering effect, where average values take longer to rise and fall. Property is also forgiving. You could purchase the worst house in the worst street and historically the value would still go up over time.
You can insure your property against most risks.
Anyone can do it
Property investing can be extremely simple, given the right attitude, knowledge and skills.
Unlike most other investments you are in complete control of your property. You can control the way you look after your asset, tenants, manager and your return, you can even manufacture growth.
Although you should not use the tax benefits as a decision-making factor, it can be a benefit of investing in property. If your property is negatively geared, it may provide tax benefits.
Although you can sell a property if times or the market is getting tough, it can take a lot longer than other investments such as shares, bond and gold.
Hidden and ongoing costs
Although there are a number of initial costs to consider when investing in property (i.e. stamp duty, deposit, legal and conveyance fees), its really the ongoing costs, such as renovations, maintenance, repairs, building and landlord insurance, land tax, water rates and council rates that make a property viable or not.
Periods without rent and tenants from hell
Occasionally properties become vacant resulting in you having to pull money out of your own pocket. You can also get problematic tenants who can damage your property and refuse to pay you rent.
The information provided in this article is of a general nature only and in no way constitutes legal or professional advice, or specific advice in relation to any finance. In all cases we recommend you receive professional financial advice for your own personal circumstances.