When it comes to securing your financial future, property investment is the way to go. It has long been recognised as an effective means of accumulating money.

Understanding these dynamics is critical, according to Team Akhlinder Dani – Property Investment Advisors. This contributes to the development of a strong property portfolio that is aligned with your long-term objectives.

Let’s look at the benefits and drawbacks of property investment so you can make an informed decision.

The Pros of Property Investment

1. A Wealth-Building Opportunity

It’s no secret that many people have become billionaires by starting out with real estate. Numerous people all across the world have achieved financial success through real estate. A significant source of wealth has always been real estate investment. People that diversify their enterprises frequently decide to invest in real estate.

2. Accessibility for Everyone

It’s a common fallacy that only wealthy people can invest in real estate. In actuality, a larger audience can follow this path. It does not require a significant amount of capital to enter the real estate market because of bank lending practises. Banks frequently offer loans that account for 80% or more of the value of a property. Investment properties would then be available to persons with stable work and some money.

3. Security and Stability

In an ever-changing financial landscape, property investment stands as a pillar of stability. The share market is volatile in nature. But the property market in Australia has proven its robustness over the years. It boasts a unique characteristic. A majority of property owners are owner-occupiers. And investors make up the remaining 30%. This mix provides a solid foundation, making real estate a secure investment option. A fact validated by banks that consider it superior collateral.

4. Income Stream

One of the most attractive aspects of property investment is the consistent income stream it can generate. Rental income from investment properties allows you to service the mortgage. And this income has historically outpaced inflation. With the current surge in immigration and a shortage of well-located properties, rents are on an upward trajectory. This provides investors with a promising revenue stream.

5. Capital Growth

Investing in well-located capital city residential properties can significantly enhance your wealth. Over the past four and a half decades, these properties have demonstrated remarkable capital growth. In fact, the average property value doubles every ten years. Property markets experience cyclical movements. So, it’s long-term potential makes it an ideal investment choice. This also emphasises the need for a long-term perspective.

6. Leveraging Opportunities

The beauty of property investment lies in leveraging someone else’s money to acquire properties. You can enter the market with a relatively small deposit, typically around 20%, while the bank finances the rest. This strategy is known as leverage and allows you to amplify your investment potential.

7. Control Over Your Investments

Property investment offers you the unique advantage of full control over your investment decisions. You can directly impact your rental property’s profitability by understanding tenant preferences. Whether it’s through renovations or enhancements, you have the autonomy to optimise returns.

8. Tax Benefits

Property investors in Australia enjoy various tax benefits. Many costs related to owning an investment property can be deducted from annual tax bills. This includes interest on loans, insurance, council rates, and even depreciation allowances for wear and tear on the property. These deductions can significantly reduce your overall tax liability.

9. Adding Value

Property investment allows you to increase the worth of your assets through various strategies. From small improvements like repainting or refurbishing to more extensive renovations, you can enhance the property’s value and rental potential.

10. No Need to Sell for Profit

Unlike some investments, property doesn’t require selling to realise gains. Instead, you can use your property’s increasing value to finance the purchase of additional properties. This strategy enables you to compound your investments and build a more substantial portfolio over time.

11. Imperfect Market Advantage

Investors often seek opportunities in markets with imperfections. Real estate, in contrast to the stock market, is an imperfect market. This imperfection means that you may purchase a property below its intrinsic value. Information, contacts, and expertise can provide you with an edge in such a market, allowing you to secure properties at a discount.

12. Insurability Against Risks

Investing in residential property comes with an added layer of security – the ability to insure against various risks. You can protect your property against events like fire or damage and insure yourself against tenant-related issues, including lease breaches.

13. Forgiving Nature

Property investment is renowned for its forgiving nature over the long term. Even if you acquire a property during an unfavourable market phase, the chances are that it will appreciate in value over the years. While we don’t endorse purchasing subpar properties, the historical performance of real estate suggests its ability to withstand market fluctuations.

The Cons of Property Investment

1. High Entry Costs

One of the primary barriers to entry in property investment is the substantial upfront costs. Investment-grade properties typically come with price tags starting at around $500,000 and can extend into the millions. Accumulating the necessary deposit for your first property can be a significant challenge.

2. Ongoing Expenses

Property ownership isn’t just about buying a property. It is also about waiting for it to be appreciated. It involves a series of ongoing costs, including insurance, council rates, maintenance, repairs, and mortgage repayments. Negative gearing, where rental income doesn’t cover expenses, can also be a financial challenge.

3. Lack of Liquidity

Real estate doesn’t offer the same liquidity as some other investments. Selling a property can take time, and it might not be possible to access your investment quickly when needed. However, this lack of liquidity contributes to the stability of the property market.

4. Value Fluctuations

While property generally appreciates over the long term, it’s not immune to market fluctuations. There can be periods when property values decline, potentially leading to negative equity where you owe more on your mortgage than the property is worth.

5. Tenant-Related Issues

Managing tenants can be a source of stress for property investors. Difficult tenants or vacancies can impact rental income and cash flow. However, working with experienced property managers can help mitigate these risks.

Is Property Investment Still a Smart Choice in Australia?

Property investment remains a compelling avenue for building wealth and securing your financial future in Australia. However, it’s essential to approach it with the right strategy and understanding. At Team Akhlinder Dani – Property Financial Advisors, we emphasise the importance of selecting “investment-grade” properties in suitable locations, taking a long-term view, and building a diversified portfolio.

Remember, property investment is not a get-rich-quick scheme but a pathway to long-term financial stability. With the right knowledge, a well-thought-out plan, and professional guidance, you can harness the potential of the Australian property market to achieve your financial goals. Whether you’re considering your first investment or expanding an existing portfolio, we’re here to provide the expertise and support you need in your property investment journey.