Wednesday, 11 June 2014 18:52
Written by Vernon
Forget shares and term deposits. Here are 10 reasons why you made the right call to invest in property.
1. You have more leverage
Property offers more financial leverage, and the more leverage you have, the more quickly you can build wealth says Rocket Property Group founder, Ian Hosking Richards.
“For example, if I purchase a property for $400,000 I can put down a 10% deposit and borrow 90% from the bank. If that property increases in value by 10% I have made $40,000, because I have only contributed 10% of the purchase price but I get 100% of the growth,” he explains. “So if it goes up in value by 10% in the first year I have effectively received a 100% return on my initial deposit. And if the original deposit and other buying costs came from my existing equity, it means that I have borrowed the full cost and do not need to put any of my own cash in, but still get 100% of the growth. I would aim to purchase a property that has great potential for growth and pays for itself even on high borrowings, so for me it is hard to imagine any other investment that is more attractive.”
2. Investing in property is simpler than you think
The amount of paperwork you need to produce and information you need to assimilate can be daunting at first, but the investment process in itself is remarkably simple. There are no complicated steps you need to take. As long as you’ve got your finances sorted out, you can start doing your research to find the right property. If you apply thorough due diligence in terms of getting inspection and valuation, there’s little risk for you to overpay or buy a dud property.
3. You have “control” of your investment
Unlike other investments classes, property offers you with many options in terms of growing the value and income on your property. You can also control where you buy, how you buy and when to sell.
4. You have stability
Real estate is less volatile than stocks or mutual funds, especially in uncertain economic times. The continuing demand for housing fuelled by strong population growth ensures property prices are supported in general. It’s also worth noting that the price drops most people fear are NOT real losses until you actually sell the property. If the property was purchased correctly and generates a healthy cash flow, the investment can be sustained until the price gets back up again.
5. Property is an easy asset to understand
Unlike the share markets where there are complicated terminologies you need to get your head around, real estate is relatively simple. You know what a house, unit or a townhouse is and you don’t need a 60-page prospectus to tell you all about it.
6. The taxman helps you pay off your investments
You can claim a range of tax deductible expenses through your investment property, which will help reduce your tax bills and improve your cash flow. A good accountant can help you cut your tax expenses by the tens of thousands of dollars, legally through your investment property.
7. Your tenants pay your mortgage
Another advantage to property investing is that tenants are paying down your mortgage while you sit and watch your investment grow in value.
8. Property offers predictability
Property is undoubtedly more predictable than other investment-classes. With well-chosen property, you can look out to 18 or 24 months into the future and know which direction the market pressures will be pushing, unlike the share markets where anything could change within seconds.
9. Property is recession-proof
Property with strong cash flow can ride uncertain times such as during a recession for simple reason that it meets a basic need- housing. People will always need a place to live, even during difficult times. They would do everything just to have roof over their heads. They are prepared to forgo other luxuries just to have enough money to pay for their rents or mortgage.
10. Property can make you rich
Real estate makes more billionaires than any other asset classes. In the recent Forbes Billionaire’s List, it reported that a total of 135 property tycoons now make up the world’s wealthiest list with 14 property billionaires joining the ranks this year alone, boosted by surging property values around the world.
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