Why invest in property?
Investing in real estate is done for either capital growth (as the property’s value rises over time) or rental income (from leasing the property to tenants). Some people opt to invest in real estate because of the tax advantages.
Advantages and considerations of property investment:
| Advantages | Considerations |
| Property might be less volatile than other investments because it is a tangible investment. | The price to buy and sell a house Stamp duty, legal fees, building and pest inspections, and loan setup costs are all additional costs when investing in real estate. |
| Many of the expenses associated with owning a rental property may be tax deductible. | A significant distinction between an investment property and a home is that when an investment property is sold, capital gains tax is often required. |
| Property can provide long-term returns if the value of the property rises over time, and there is also the possibility of receiving rental income before the sale. Positive gearing is a long-term objective. Where property income exceeds property expenses, the investor may be able to earn a secondary income. | There’s no guarantee. When looking to buy for investment, they should research: capital growth, rental property income, ongoing running costs |
| Gain access to your property’s equity. Equity is the current market value of your property minus the amount the owe on it. | No assurance exists for equity. Because the market worth of the property can rise or decline, so can the equity in it. |
| One can have complete control over property, including strategies to boost its worth, such as upgrading and paying down mortgages faster. This can help to boost the property’s equity. | If one wants to make physical improvements to their property in order to increase its value, ensure the property’s value and whether it’s profitable. |
Reasons to Have an investment portfolio
1. Grow incoming cash flow:
One of the upsides of owning investment properties is earning a passive income.
2. Research:
Have access to the latest Australian investment property market research identifying the up-and-coming hotspots and properties, growth forecasts for apartments and houses at any given time and other long-term property growth opportunities.
3. Minimise your Tax:
The expenses on the property can be claimed as a tax-deductible offset
If the rental income doesn’t cover all the expenses (including mortgage), claim ‘negative gearing’ or the ‘loss’ against PAYG employment income. This reduces the overall amount of tax they pay.
4. Compounding to Increase the Returns:
5. Take steps to build long-term wealth Faster:
When the purchase is an investment property, one can be confident that the property is almost certain to build value in the long term.
Frequently Asked Questions:
What is a property portfolio?
PortfolioThe real estate portfolio definition: A property portfolio is a collection of property investments owned by an individual, a group, a trust or a company.
What does a balanced portfolio look like?
For property investment, most investors have the goal of financial freedom from a property portfolio that pays for itself while also consistently growing in value.
To do this, one will need a portfolio of properties with a mixture of properties with high rental yields and properties that are more likely to give high capital returns.
Can one create passive income in real estate?
Yes, the property can be a way to take the next step to gain financial freedom and create a passive income because both property value and rental income from a property are almost guaranteed to increase each decade.
What is capital growth?
This strategy aims to purchase a property with strong growth potential and then sell it for a healthy profit later on. These properties tend to have more incredible purchase prices and are more likely to have negative cash flow, which means that the ownership expenses outweigh the annual revenue.
What is a positively geared property?
A positive cash flow investment earns more annual rental income than it spends on loan payments, strata fees, and other ownership-related costs.
Positively geared properties may be easier to finance, lower cash flow risk, and generate passive income.
Maximising the rental return is critical in this case.
It should be noted that the income from the investment is taxable.
Conclusion:
There are many compelling reasons to get property portfolio growth back on track. Not only does it allow one to grow their incoming cash flow through passive income from investment properties, but it also provides them with access to the latest Australian investment property market research, making it easier to identify potentially lucrative investment opportunities. Building a strong and diverse property portfolio can help one achieve long-term financial stability and security while also providing a valuable source of assets.