Sensible Investments in Property – Residential or Non-Residential – Have Many Benefits, Including Potential Capital Growth
Property has been a popular route to wealth for many Australians for many years. Buying their own home is often the first investment many people make; purchasing another property may well be the second even before shares and other assets.
However, your first investment in property needn’t be your home. Indeed, buying a small apartment to rent out can be a good way to accumulate funds so you can eventually buy your own place, in an area where you want to live. Increasing numbers of young Australians are choosing this route, buying in one suburb while renting in a more desirable and expensive area or living at home for a while longer. Others are diversifying into non-residential property via property trusts and syndicates.
Sensible investments in property have many attractions. Property can be less volatile than shares (though not always) and it tends to be regarded as a safe haven when other assets are declining in value. It has the potential to generate capital growth (an increase in the value of your asset) as well as rental income. Then there’s the tax advantages associated with negative gearing: more about that later.
However, as with any investment, there are no guarantees. Property prices go down, as well as up, and sometimes tenants are hard to find in some areas and markets especially ones who will take care of your investment. RealWay has specialists across the group who pride themselves on tenant selection with the latest operational systems and knowledgeable service to deliver you a “peace of mind ownership experience”.
Investors need to have a keen awareness of the interest rate environment: how higher or lower rates might affect their expected net return and the market for their property should they wish to sell. They also need to make sure the return or yield from their property stands up against the return they might have achieved had they invested in shares, for example. Of course, you don’t have to make a direct investment in property. Pooling your funds with other investors in managed funds with a property focus, listed property trusts or property syndicates provides exposure to a broader range of property including commercial, industrial and retail as well as residential often with a smaller investment required.
Don’t be scared of taking your first step in property investing as 80 per cent of global household wealth is generated through property investment. Always talk to your financial advisers to ensure it is the right investment for your personal circumstances.