If you are considering investing in property, particularly if you are a first time investor, you have probably been weighing up the pros and cons of property investment in your head. Perhaps you have also been talking to other people you know who own an investment property for their learnings and advice.
You are right to consider the pros and cons of investing in property carefully because it is an important decision and probably one of the most expensive transactions you will make in your lifetime so you want to spend your money wisely.
To help you with this process I have outlined below what I consider to be some of the most important pros and cons of investing in property and they are points every investor should be aware of to help you make an informed decision.
Just some of the advantages of property investment include:
- Anyone can do it – you don’t need a degree or a formal education to benefit from the advantages of property investment;
- There has never been a more affordable time to borrow money with interest rates at an all-time record low;
- There are plenty of investment options to choose from including buying an established, new or off-the-plan house or apartment, or building a brand new investment;
- Unlike shares, you are able to see and touch your property and have something tangible to show for your investment;
- Property investment can help to reduce the amount of tax you pay each year;
- You can use equity in an existing property to minimise the deposit required to purchase a new investment property;
- If you buy or build a new investment property you can claim full depreciation on the property;
- You can purchase an investment property using different ownership structures to your advantage including via your self-managed super fund;
- You don’t need to purchase in your local area so you can benefit from the market conditions in different suburbs, including interstate or overseas;
- There are plenty of experienced professionals to assist you with your investment journey – you do not need to have all the answers upfront;
- Investing in property is a great way to help you to better plan for your retirement;
- Property investment can provide you with greater financial security.
But if you want a balanced view when considering the pros and cons of investing in property it is important to consider some of the potential disadvantages too. They include:
- You may be uncertain where or when is the best time to invest;
- If you don’t have existing equity or access to funds you may need to save a sizable deposits to borrow money to purchase your first investment property;
- Depending on your loan structure your repayments may increase if interest rates rise, exposing you to greater levels of risk;
- Your investment can be impacted by changes to the economy and property market;
- Your property will incur ongoing costs and require regular maintenance;
- Your investment property may attract irresponsible tenants who cause damage or fail to pay rent;
- If you are want to subdivide and redevelop you may be unsure of the best development options to maximise your profits;
- Property investment is for the longer term – it will not make you an overnight millionaire.
But it is important you don’t let any potential negatives deter you from investing because there are obviously numerous advantages of investing in property otherwise it wouldn’t be one of the most popular forms of investment in Australia. It is estimated approximately 8% of the Australian population (or around 2 million people) own one or more investment properties and we know the reason why – because investing in property has provided greater financial security to more Australians than any other type of investment.
So if you are weighing up the pros and cons of property investment and would like to talk to an expert, contact the Investor Assist team here. Our team of Property Investment Specialists have worked in the industry for many years and each manage their own investment portfolios so they are highly experienced when it comes to talking about the pros and cons of property investment!