Investing In Property

Investing in Property: Things to Consider

1. Income vs growth capital potential: A property can earn you money in two ways: as an asset that increases in value over time, and through rental income. There are many different properties to consider, in which you must ensure they are right for you and aim to fulfill your objectives.Some properties have the potential for high capital growth, however they are often more expensive to buy. The rent is unlikely to cover the costs of mortgage repayments and maintenance. Thus, any increase in interest rates could see you struggle to hang on to the property.

On the other hand, properties with positive cash flow, where rental income exceeds your ownership costs, can offer a less risky way to invest. However, these are often lower value properties with less potential for capital growth in the long run.

2. Negative gearing: When the costs of owning a property are higher than your rental income, you can use this loss to reduce your taxable income. This is known as negative gearing.

While there are tax benefits to negative gearing, it’s a strategy that needs to be carefully considered. Speak to your financial adviser for more advice on this, as it is not a simple strategy.

3. Property management: The property requires someone to take care of it. If you’re just looking to cut costs, it’s best to take care of the property yourself. But don’t forget that this means you’ll have to do everything on your own, from finding tenants and collecting rent to organising repairs and maintenance.

Hiring an agent to manage your property can save you a lot of hassle. The fees are also tax deductible. However this decision is simply based on preference.

4. Physical property vs property fund: You don’t have to purchase a physical property to be exposed to the property market. Property funds can give you that exposure without all of the extra costs associated with physical property. You can also choose a variety of funds that fit your objectives.

Another big advantage of this is the liquidity of the investment. Unlike physical property, property funds usually allow you to access your funds when you need it.

5. Get professional help: Alternatively, you can contact your financial adviser or professional to help setup your property strategy or to simply answer some of your queries.

 

 

 

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