Buying an investment property is considered by many to be one of the best investment choices. Investment properties are a lot easier to understand compared to other forms of investment, mortgage interest rates are at record lows today, and you can use your home's equity to fund your property investment.
If you’re looking to finally invest in real estate today, here are the top benefits of investing in a property in Australia:
Property investors enjoy tax benefits from their rental properties such as:
- Negative gearing: This occurs when the mortgage repayments and expenses exceed the rental income. You can offset the income thus you save on tax.
- Depreciation: Investors can claim depreciation allowance on fittings and fixtures, and you may also be entitled to building allowance deduction.
You may benefit from capital growth when you sell your property. Capital growth is where your property increases in value between the day you purchased and the day you put it on sale. There are plenty of factors that can affect the price of your property. These will include the location, property market conditions, supply and demand, and any home improvements you made to the house or unit.
Rental property is always in demand in Australia so you can expect a low vacancy rate, especially if your house or unit is in a good location and it has attractive amenities. Investing in property can be less volatile than to shares or other forms of investment.
You will need to do most of the legwork during the first stage of investing, usually when searching for the right property, applying for an investment loan, and finding for tenants. After that, you are pretty much generating regular income without making major effort.
Leverage is where you make an investment using debt. When investing in real estate, you typically use your own money for the deposit on the property, which amounts to 20% of the purchase price. Then you borrow the rest from a financial institution. This allows to you buy a much more valuable property than your deposit alone would allow, and receive capital gains on the entire property value, if it goes up. Of course, it also increases your loss should the value of the property fall.
Investing in a property can be a good opportunity to build your wealth. Make sure to choose your investments carefully so you will be able to reap the financial rewards in the long term.
