Why invest in property? 中文版
In my opinion, well located, actively managed investment property is one of the best investments for everyday investors. With an attractive combination of solid capital growth, regular income and generous tax breaks, it’s a simple investment that most people can understand. With a little effort and know-how, you can convert a modest deposit into a sizeable nest egg.
The power of leverage
The basic principle of leverage is borrowing money to buy an appreciating asset. If the value of the asset increases faster than the amount you repay, your wealth increases. Leverage is a way to increase your gains by investing with borrowed funds. The reason why property is so attractive to investors is because it has better leverage than almost all other types of investments. Most lenders prefer financing property as opposed to other investments because it’s less risky, it’s tangible, prices don’t fluctuate wildly, and it’s easy to value.
Property is one of the few investments that you can potentially add value to quite easily. In 1984 I bought a small fixer-upper in Paddington, Sydney, and over a few weekends with a few friends who were in the building trade I transformed a near derelict terrace into an income producing asset. I transformed the value of the property and the rental income for very little outlay.
There are literally hundreds of ways to add value to a property, many of which only cost a small amount of money. You can paint, build a barbecue, put in some paving, renovate the kitchen, landscape the garden, or simply tidy the garden up a little. The list is almost endless.
Accessing your profits
You don’t have to sell your property to access your profit, you can simply refinance. You can get a new valuation of the property and borrow more funds using the increased equity as security.
Exceptional tax advantages
Property offers excellent tax advantages through negative gearing, which allows you to offset any losses against your other income. Always get advice from an accountant to maximise the tax benefits of your property investments. The amount that you might pay a tax expert should be recouped many times over by the amount of tax that they save you.