What Is Property Investment?

Over the past century, property prices in Australia have continued to rise, encouraging many people to buy property as their primary investment strategy. Investing in property is a great strategy when implemented as part of a long-term or short-term financial plan. While there are many advantages to property investment, there are also some downsides to consider.

So, what is property investment?

In regards to long-term property investment, this entails purchasing property in a high-growth suburb, and ideally over time that property increases in value. When you sell your property in the future, you will earn what’s called a capital gain.  A capital gain is the difference between what you paid for the investment property and what you sold it for. In regards to short-term property investment, investors buy real estate, renovate the property, and sell it at a profit within a relatively short timeframe.

An investment property can be in the form of residential such as a house, apartment or townhouse, or non-residential such as land, commercial property or industrial property.

Pros & ConsAs with any investment strategy, there are both advantages and disadvantages when it comes to property investment.

Some of the advantages of property investment include:

1. Property is seen as being less volatile than shares and other forms of investment. Put simply, this means that property doesn’t go up and down in value as quickly as shares do.
2. Property is a physical asset, so you are investing in something you can actually see and touch.
3. If your investment property is tenanted, you will earn a rental income, meaning the people living in your property will be paying off part or all of your mortgage for you.
4. There are a number of major tax benefits that come with property investment, meaning investing can help you to pay less tax.
5. Everyone needs a place to live which is why real estate is almost always in demand - the housing market may have its ups and downs, but it tends to be less impacted by market shifts and more likely to yield fixed returns even in the current economic climate.

Some of the disadvantages of property investment include:

1. There are high entry and exit costs when it comes to purchasing property like stamp duty, legal fees, and ongoing real estate agent fees.
2. A rise in interest rates often means higher repayments and lower disposable income on your end.
3. Unlike shares, you can’t just sell off a section of your investment property if you need some quick money.
4. If you go through periods without tenants, you will have to be prepared to wear the costs yourself.
   

If you’re thinking of investing in property, it is best to get professional advice from a qualified financial planner. With the right guidance and the right property, you can be on your way to creating a secure future.

If you property investment is a strategy you would like to know more about, get in touch with us today.

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