Safe as Houses — Why Property is a Good Choice for Your Investment Dollars

When Australians use the phrase “as safe as houses”, they’re generally referring to something which is secure and certain. The phrase itself finds its roots in the notion that houses are a shelter from the elements, but over time the phrase has come to have a very different meaning — and that meaning is all to do with property investment. After all, when it comes to safe investments, residential property is at the top of the list. Property is a low-risk investment with high long-term returns. Let’s take a look at some of the reasons why property is a good choice for your investment dollars:

The Risk Factor

Property investment is low risk when compared with share market investment. But don’t just take my word for it — lenders feel exactly the same way, with property able to be much more highly geared. In fact, this in itself only adds to the low-risk nature of property. The fact that lenders view property as low-risk means that you can borrow higher against a residential property giving you an advantage that increases your returns.

Tax Breaks Aplenty

Following on from the lowered risk factors discussed above, investment properties also come with their own tax concessions — in particular, that of gearing and depreciation. We’ve already mentioned that property enjoys high gearing. Higher gearing leads to higher interest payments, creating a larger shortfall. That shortfall can be offset against your taxable income, lowering your tax rate and resulting in better outcomes at the end of the financial year.

Depreciation, on the other hand, is a tax break which doesn’t necessarily require any capital to be outlaid in the first place. As features of your property degrade over time — things like kitchen equipment, carpet and brickwork, for example — you can claim these “costs” at tax time, once again lowering your taxable income. Depreciation is particularly effective for newer houses, as property depreciation allowances are at their highest.

They’re Gonna Pay Rent

Provided that you’ve been smart with the purchase of your investment property, choosing somewhere close to amenities, transport and employment opportunities in order to ensure a steady and consistent tenancy rate, you can begin receiving a regular income from your tenants. This income can be put towards repayments on your property. Nothing like having total strangers on hand to help to pay off your investment!

It’s in your hands

Perhaps the biggest argument for investing in property and one of the main reasons it is so highly regarded as a low-risk investment is the degree of control you have over your property. Unlike shares, which can plunge without even the company executives themselves knowing such an event was likely, property has shown itself over time to be a sure thing. Slight fluctuations may take place from year to year, but the property market has always been cyclical and if things are bad at one point they’re sure to be good again at the next. Furthermore, you can decide how involved you wish to be with your property. Whether you’re responsible for the everyday running of the place or you wish to delegate such tasks to a property manager, the decision is yours and, ultimately, you are the one in control of the financial aspects.

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