Property investing advantages:
- Capital growth
- Tax benefits
- Guarding against inflation
- Rental income
- Tangible Product
- Ownership Control
Leaving your cash in the bank doesn’t provide capital growth. Capital growth from property is where it increases in value over time. This is where buying the right type of property in the right location is important as you can gain a significantly higher capital growth than market averages when you get it right.
Many investors prefer to buy property instead of shares as they feel it is less risky and property provides steady consistent returns. Owning property provides peace of mind knowing that their property value is very unlikely to plummet overnight, which can happen to the share market and in some extreme cases totally disappear.
Property allows you to use more of other people’s money (ie the banks) and less of your own money to purchase an asset of much greater value than you would have been able to. Banks are more comfortable with property than shares and therefore are happy to lend you a lot more than they would to purchase shares. Most lenders will lend up to 95% of the value of the property that is being purchased, whereas they will usually only lend to about 50% of the value of shares due to the increased risk of shares. The increased leverage also allows you to claim a greater tax deduction on the interest that is being charged for the loan.
Once your property has increased in value you can also leverage against that increased value by borrowing to purchase more property/s. Using property as security to borrow money to purchase other property allows you to leverage to a greater extent than if you were using a share portfolio as security.
Property investors have several tax benefits available to them. Depreciation of the building can be claimed as a tax deduction and often provides some excellent benefits, particularly when buying off the plan or newly constructed property/s. The process of claiming building depreciation is a clever way to increase your cash flow and when combined with the rental income can mean that you only need to contribute a small amount towards your investment property. Of course in some cases your tax benefits and rental income will mean that your property actually puts money back into your pocket each month (cash flow positive).
Increasing your leverage by borrowing at a higher LVR allows you to claim a greater tax deduction on the interest charged on the loan.
There are many expenses incurred in running your investment property that will also be tax deductible. Such as travelling to your investment property for a periodic check and condition report, or to collect rent or money paid to a property manager that is managing your property for you.
Guarding against inflation
History has shown in Australia and worldwide that property increases at a greater rate than inflation. Periods of growth can vary but generally speaking in real terms (without inflation) property growth outstrips increases in inflation.
One of the main reasons people decide to invest in property rather than shares is that they have greater control over their asset. You have no control over shares but with property you can increase the rent or renovate the property if and when you choose. You may also have the option of subdividing your property and even create another rental income stream from an extra townhouse or granny flat.
Once your investment property purchase has settled you have the potential to receive an income almost immediately. Usually you will receive at least 2 weeks rent in advance once your tenant signs their lease and then regular rental payments thereafter.
I mentioned previously that many people invest in property because property provides them with more control with lower volatility in returns and capital growth compared to investing in shares. Many property investors say they prefer to invest in property because they can touch it, feel it and drive past it.
At Latte Property we have over 36 Property Providers on our Panel, providing you with a multitude of property types throughout Melbourne and Australia
With over 25 years experience and knowledge to share with you we can help you gain clarity on what to buy and where to buy.
In addition we can help reduce risks with multi-level screening and due diligence processes from our extensive Panel of property providers.
We will help you identify and locate great properties as well as help you with related services such as:
Call today to speak with one of our consultants and/or to book your personalised Strategy Session.
We look forward to hearing from you soon.
Any Questions? Ask Us Here Ph: 1300 577 233
By Darryl Simms
Author | Speaker | Property Investment Specialist
Founder of Latte Property
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