Investing in property is a popular Australian pastime. With around 2 million Australians owning an investment property, there are just as many individual reasons why people choose property investment strategies to build and boost wealth. Here are five of the big ones:
Investing for capital growth
For most investors property is seen as a long-term game. Buy now and watch your property (or properties) increase in value over time, making you rich! Everybody knows someone who bought a property in an emerging market and watched it double or triple in value over the last few decades. This could be you. Seek out advice and conduct your own research to find a property investment opportunity that suits your goals.
Investing to get on the property ladder
Many first home buyers are choosing to purchase an investment property to get a foothold in the market. Buying in a high growth area and letting your tenants pay off your investment loan is a great way to work towards owning your dream home down the track. A good financial advisor will help you navigate the pros and cons of this strategy and advise whether you are eligible for any grants or Government incentives.
Invest for positive cash flow
A property with positive cash flow will earn you more money than it costs you to own. A “positively geared” investment opportunity is possible if you buy in an area where rents are high in relation to property prices. It can put cash in your pocket to supplement your income and help build your investment portfolio.
Invest to make the tax system work for you
On the other hand, a “negatively geared” property investment costs money to own and maintain – but this can be an effective strategy if you’re aiming to minimise your tax bill. Any losses your property incurs can be claimed against your taxable income – as can depreciation on building, plant and equipment. Some of these deductibles may also be claimed on a “per pay” cycle thereby giving you a more immediate benefit rather than having to wait until the end of the financial year. Speak to your financial adviser or accountant about the pros, cons and risks of negative gearing. It may be an investment property strategy – or a tax strategy – that works for you.
Invest for retirement (or posterity)
Building a nest egg for retirement should be on everyone’s agenda. Whether you plan to downsize into a beachside unit the moment you turn 65 or you hope to leave a real estate empire for future generations, property investment opportunities abound.
Investing in property has been a successful wealth building exercise for generations of Australians and it’s never too early or too late to start.