Property investment is a great way to build your wealth portfolio. Here’s why.

We know a lot of you may be feeling wary about investing in property right now. We understand – the media beat-up can feel pervasive. High and unpredictable interest rates, soaring property prices, a competitive real estate market. Scary stuff. Why would anyone want to invest in property.

But when you look beyond the sensationalised narratives to observe the facts, you will see a different story. There are many everyday Australians out there still earning an income and building their wealth through property. Even first-time investors. And you can too.

Of course, property investment can have some elements of risk, just as any investment can. But the rewards can be worth it, provided you do your research and use sound judgement.

Why invest in property? In this article, we’ll explore the strategic advantages and the steps you can take to get started in property investment.

Why invest in property?

Capital growth

Capital growth is a major factor behind why we invest in property.

As the value of your property grows, so does your wealth. So rising property prices are often a positive for property investors. You can sell your property and enjoy the profits (minus taxes and fees, for example) or build equity.

You can then use the equity in your property to buy more properties, or fund a renovation or other purchase.

Regular cash flow

When you own an investment property – whether residential or commercial – it’s likely you’ll ultimately have tenants who will pay rent. This regular source of income can help fund your life or even another property purchase. Better yet, this source of income is considered passive because you have to do little to earn it (once you buy the property!).

This is great because you’ll earn a rental income every week, fortnight or month, depending on the agreement. You’re also generally in control of how much rental income you earn, provided the market is willing to pay it.

If the rent you’re paid is more than the ongoing costs of the property (i.e. loan repayments, maintenance costs etc), then your property is ‘positively geared’. And that means you’ll have a source of consistent income for as long as you have tenants.

But if the cost of the property is more than the rent, you have a ‘negatively geared’ property. In this case, you will need to find additional money to help cover the expenses. But the good news is you’ll likely have tax advantages. Give your accountant a call to talk over any tax benefits you might have! They can help you understand all of the deductions available.

Portfolio diversification

When asking yourself ‘why invest in property’, diversification is one of the best reasons. In fact, rounding out your portfolio with real estate is one way to avoid ‘putting all your eggs in one basket’. When it comes to investment in general, diversification is generally a good idea.

Real estate also allows you to diversify within your property portfolio itself. This means buying in different geographical regions, different types of properties or buying some commercial and some residential properties.

It can be fun!

Property can be a flexible asset. There are lots of different ways you can make money from your investment. You can rent it out long term or as a holiday home, renovate and flip it, or simply sell it. You could even rent it out for short stays and enjoy it with your family for holidays. You can also choose to add more value to your investment by renovating.

With so many choices, you’re bound to find one that suits you and your situation, and is fun as well!

But where do you start?

Starting your investment journey doesn’t have to be overwhelming. But you do need a plan.

Follow these basic action steps to get started on your property investment journey.

• Identify your goals. Are you interested in renovating? Do you want a holiday house that you can use? Do you want to secure long-term tenants? Figure out the kind of investment that will help you achieve your financial goals. You will need to devise a plan and have an exit strategy.
• Assess your risk. Are you in a position where you can invest in property right now? Can you afford property expenses? Will you survive if there is a break between tenants? Consider all of the red flags and warning signs that now may not be the right time.
• Do your research. You may not need any special skills, but you will need to learn about the market. What are the current conditions? Where is the demand? What is the median price in your chosen area? What would a good deal look like?
• Assemble your team. You don’t need a lot of expertise, but your team does. You will need to seek out reputable professionals to help you. Consider a real estate agent, property inspector, conveyancer, financial planner and mortgage broker.
• Get your finances sorted. Buying the best investment means getting the best deal. So you need to be ready to strike when the right property enters the market. Having your finances sorted can give you a competitive advantage. Read up on our home loan tips and organise pre-approval.

Want to learn more about why and how to invest in property?

The Lending Loop team know property inside and out. We understand why people invest in property and can provide expert advice to guide you on your journey. We can help you secure the best home loan to achieve your financial goals whether you’re buying your first home or buying your first property investment.

Get in touch and let’s have a chat!