Property Investment Guide
Achieve your property investment dreams
Why Invest in Property?
Many Australians look to invest in property to build their long-term wealth.
When deciding to invest in property there are different types of investments you should consider;
The type of property you choose to invest in will depend on your financial circumstances and the ability of the investment to meet your needs.
What Are the Benefits of Property Investment?
Property investment is popular because it is tangible – you can see it; you can touch it. A common expression used is ‘it is safe as houses’ as the tangibility gives some people a sense of security compared to something like Australian or international shares. Property provides multiple benefits; it provides:
What Are the Risks/Negatives of Property Investment?
Like with any investment there are risks. The risks of property investment come from not only the market (property values and interest rates) but also tenants.
The downsides or risks associated with property investment are:
If you make a mistake the costs can easily run into the tens of thousands of dollars and higher.
How Much Do I Need to Buy Property?
Ideally a deposit of 20% is required; once 20% is achieved you avoid having to pay lenders mortgage insurance (LMI), which is a one-off premium. If you are unable to achieve a 20% deposit LMI can run into tens of thousands of dollars.
You will also need to cover stamp duty costs on top of your deposit. Stamp duty varies between states.
Use the following calculators to estimate what LMI and stamp duty could cost you.
How Should I Structure the Finance?
The way in which you structure the finance of your rental property is important as it can have implications for tax and asset protection. For questions, around whether you utilise a principal and interest or interest only loan and how you secure your loan (against your family home or purchase property and deposit), you should consult your financial planner, accountant and/or mortgage broker. These are important decisions as they can affect cash flow, tax, and the security of your home.
Can I Buy Through Superannuation?
You can buy property through your self-managed super fund (SMSF) however it is more complex, and it is advisable to receive professional advice when progressing with this strategy. You need to comply with the below rules:
One exception to these rules is you could potentially purchase your business premises through your SMSF, allowing you to pay rent directly to your SMSF at the market rate.
What Else Can I Invest in?
When deciding on where to invest your money it is important to consider diversification (i.e. not putting all your eggs in one basket). Investing in property has its advantages and risks. Consider your investment portfolio as a whole and make sure you have spread your risk across a range of investment options such as stocks, property, bonds and cash.
There is also the opportunity cost which you need to consider. Would your money be better invested in another type of asset which may give you a higher return?
How Do I Get Started?
You can either begin to research the property market yourself or speak with an expert. Be mindful that, as with all investments, there is an element of risk and you need to make sure you take your personal circumstances into consideration. Also, be cautious of property spruikers. Unfortunately, the property industry is not currently regulated.
Research, research, research! Do your homework – it is important to do your due diligence on:
Once you have done your homework and are confident in your decision at the end of the day you will still be at the mercy of the market. Property investment is a good way to grow your wealth over time. If you have any questions it is important to seek professional advice.
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