6 Good Reasons to Invest in Property
Do you sometimes wonder how seasoned property investors got started and why they invest in property?
Is property investing really that good of an investment and if so, why doesn’t everyone invest in property?
Let’s go through the top 6 good reasons to invest in property.
To invest in property takes more than just an income and a deposit, you have to have the determination and the right mindset to achieve success.
However, anyone can realise their dream of achieving their financial goals by investing in property.
For centuries investors have invested in property as a way to increase their wealth. But what most people don’t realise is that the increase in value is not only the building but the actual land itself.
Land value increases over time whether there is a property on it or not, and the more valuable the land is the more you pay per sqm. For example, a 400sqm site in Sydney is worth more than a 400sqm site in Cairns. But if you were to build the ‘Exact’ same property on both pieces of land it would cost pretty much the same, the only difference would be labour costs excluding any service connections.
Investing in property is not for everyone, as not everyone likes the idea of having that much debt, it can seem rather scary. But like anything you do for the first time, it’s always a learning curve, a little bit scary because of the unknown, but don’t let yourself focus on the negative aspects, focus on the positives. If unsure ask for help from a professional.
Let’s go through the 6 good reasons to invest in property and hopefully that will help you decide to invest in property.
1. Financial Independence
Now, more than ever, it’s important to make sure you have the right steps in place if you want to live comfortably in your retirement.
The retirement age is increasing, and people are no longer able to rely on the aged pension as a sole source of income.
But if you start now (no matter your age) you can build a property investment portfolio that will provide you with financial independence so you can enjoy retirement.
For some people, it means purchasing one investment property that provides a rental return.
For others, it means building a veritable monopoly of investment properties in an apparent bid to conquer the universe.
So don’t get bogged down in thinking you need 10 or 20 investment properties to retire well, just start out with your first then work your way up.
At Key to Australia we like our clients to aim towards owning (debt-free) 4 investment properties which will give you around $2,000 passive income per week ($500 weekly rent), that’s $8,000 per month. If you want more passive income than that then just purchase more or one of our Dual Key properties (high cash flow), but most Australians are happy with 4 properties.
2. Create Passive Income
Invest in property for cash flow, which is called passive income, don’t be a speculator and try and time the market to achieve capital growth.
Capital growth comes over time and that’s why it’s important to start now no matter what the market is doing.
So your main goal is to invest in property to create a passive income (rental income), this will grow over time as rents increase and your debt (mortgage) decreases.
The idea is to have zero debt on your property at the time of your retirement so that passive income is paying you to live.
Think of passive income like your Super. You put money in to pay down the mortgage and your employer is your tenant who pays you also to cover the cost of the mortgage and other expenses. But this is where property investing gets really exciting, once you have no debt and rents continue to rise you still get paid, plus the increase in capital growth has happened over 10+ years so you can either sell the property and live off the capital or pay down debt on another property.
At Key to Australia we help ordinary hard-working Australians purchase an investment property.
We help you find the property in the right area so you can achieve passive income and capital growth.
We make property investing easy and simple by helping you invest in property and live the life you deserve in retirement. Apply for a free consultation today.
3. Take control of your own property investments
The great thing about investing in property is that you’re completely in control of what you purchase whether that’s old or new, and you can take steps to ensure that you give yourself the best chance of achieving excellent capital growth or rental return (cash flow) figures.
Property investing is also great because you can touch, smell, see and renovate your investment, try renovating your share portfolio, well I suppose you could print out your shares on embroidered paper!
When investing in property you have the choice of the tenant you choose, how your property looks and which bank you get a loan through.
You have control of your assets which makes property investing very exciting. But for those who don’t want to be too hands-on, you can find help via a property manager, builder, accountant, lawyer and or mortgage broker.
If you would like our help contact us for a free chat.
4. Grow your portfolio as your equity increases
Once you start investing in property, it’s sometimes difficult to stop.
You start to get the bug and realise that it’s not actually that hard once you get the support and professionals around you to help.
One investment starts to grow which allows you to purchase another, and before you know it you have a nice little collection of properties making money for you.
This is one of the major reasons you are able to purchase more than one rental property by using equity.
Equity enables you to borrow a percentage of the properties value (equity) to use as a deposit to purchase another rental property.
How cool is that!
You don’t have to save another deposit you just use growth from one property and put it into the next, the more properties you have the easier it is to purchase more.
But newbie property investors beware, invest too fast and it can all come undone if the market drops or your cash flow dries up, always be smart and invest wisely.
5. Capital Growth
If you choose wisely, you should be able to achieve strong capital growth on your investment properties.
The key is to choose the right type of property in the right area, don’t just expect to buy a property anywhere and achieve capital growth.
This might not be an area where you would choose to live – it just needs to be an area with lots of potential for growth.
When you’re looking to purchase an investment property don’t buy on your emotions, the numbers need to stack up, just because it’s a cheap house in the middle of nowhere doesn’t mean it’s a good investment.
To achieve capital growth you need to make sure you buy in the right area, it is not a guessing game.
Find an area that has a population of over 100,000 (that’s growing not declining) or most major cities, where jobs are being created, current infrastructure and is growing, public transport, as well as local, state and federal government spending in the area. Avoid towns or cities that rely on one industry, for example mining towns, they boom in mining times but worth nothing when the mine closes.
All of these factors contribute to capital growth.
6. Tax Deductions
We all want to pay less tax, legally of course, so when you invest in property there are a number of tax incentives you are able to take advantage of.
In this article, I’m not going to go through them all as it’s best to seek help from an accountant for your personal situation.
If you have a job (employed by someone) you are paid a wage or salary, you receive that wage but tax is taken from your wage before you are even paid.
However, if you have an investment property, you receive your rental income which could be $500 per week over the year that’s $26,000 in income. You then take off your expenses which include, interest payments, property management fees, maintenance, accounting costs, council rates, insurance to name a few.
This could mean you have expenses of around $20,000, you would then take your income of $26,000 less $20,000 (expenses) to give you a taxable income of $5,000, this amount would then be taxed on your income tax rate.
This is one of the reasons which enables you to invest in property.
Please note tax deductions or negative gearing are not the reasons to invest in property, they are simply reasons to help you invest in property and build wealth over time.
Invest in Property the Right Way
Investing in property is an exciting way to build wealth and have fun doing it.
But don’t underestimate the research and due-diligence needed to purchase the right property in the right area.
If you do the leg work at the beginning it will pay off in retirement.
If you hope to achieve a good rental income from your investment properties, you should purchase carefully, and keep your ideal tenant in mind.
Don’t let fear stop you from investing in property, either way, always seek the help of professionals.
At Key to Australia, we know the market, we know the areas and we have the processes already in place to get you into your first investment property.
Good luck, let us know if you would like our help.