Six Advantages of Property Investment

Property investment is a perennially popular way for Australians to invest and improve their financial situation. The appeal of property as a form of investment is largely because it offers a level of safety and security which is not available in other types of investment.

In the past decade, property has been a comparatively secure form of investment. The Global Financial Crisis (GFC) hit other investment classes, such as the share market, incredibly hard with property being less negatively affected.

Although investors should not believe that property is an infallible and risk-free form of investment, there are a number of advantages that result from investing in property.

Of course investors are well advised to consider both the pros and cons of any type of investment, but some of the most appealing advantages of investing in property include:

Tax Benefits – People with an investment property are able to claim a number of deductions when lodging their tax return. These deductions relate to the costs of owning and maintaining an investment property and can include: Interest that has been paid on the loan, the costs of repairs and maintenance, fees paid for property management, rates, taxes and levies, depreciation on the building and costs incurred by travelling to and from the property to collect rent, conduct inspections and provide repairs.

Negative Gearing – When the costs of keeping an investment property are greater than the income that you receive from it, your investment property is negatively geared. This means that particular tax deductions can also be made.

An Investment for the Long-term – In order to be as lucrative as possible, properties are a long term financial investment. Rental properties are currently in high demand and this is a trend that is forecast to continue and increase. Consequently, investment properties that are tenanted represent a good long-term financial option and suit those who are looking for an investment that can help to fund their retirement.

A Positive Asset Base – If you decide to invest in property, you are generally in a good position to take out another loan or invest in some other type of asset. Lenders look favourably on your ability to maintain and repay a loan without defaulting and your investment property can be suitable security for taking out a loan for another property, car or a personal loan. 

A Low-risk Investment – Property is often perceived as one of the most low risk investment types and this subsequently appeals to people seeking a secure way to enhance their financial position. As the demand for rental properties is currently high and by all forecasts will continue to grow, investment properties provide a level of confidence that appeals to those who do not want to take chances with their hard-earned dollars.

Leveraging possibilities – Loan to value ratio (LVR) works to the advantage of many people wanting to invest in property. Investment properties are able to be bought at eighty per cent LVR, with this percentage increasing to ninety per cent with mortgage insurance. The resulting high capacity for leverage facilitates a higher return for the investor while simultaneously offering a lower level of risk as they do not need to have more personal funds committed to the purchase of the property.

When an investment property is carefully selected and chosen on the basis of the best information available, this type of investment can pay healthy dividends. As with all types of investment, the advantages and disadvantages of property investment should be carefully weighed, but in general terms, property investment is rightfully considered one of the safest and most lucrative long-term options.

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