Thinking of Investing in Property?

Buying a property to rent out is a popular form of investment. Houses and units are easier to understand than many other types of investments, yet they do have some issues you need to be aware of.

Before you enter the property market, check if this type of long-term investment suits you by visiting ASIC’s MoneySmart site for all the Pro’s and Con’s associated with Property Investment. ASIC MoneySmart Website.

This is an extract from the site:

Pros and Cons of Property Investment

The benefits

  • Property can be less volatile than shares or other investments
  • You can earn rental income and benefit from capital growth (if your property increases in value over time)
  • If you take out a loan to purchase an investment property, interest on the loan and most property expenses can be offset against rental income, for tax purposes
  • You are investing in something you can see and touch.
  • The pitfalls

  • Rental income goes up and down and at times may not cover your mortgage payments or other expenses so you may have to use other money to cover these costs.
  • An increase in interest rates will increase your repayments and decrease your disposable income.
  • There may be periods of time where you don’t have a tenant and will have to cover all costs yourself
  • You can’t sell off a bedroom if you need to access some cash in a hurry
  • If property investment is your major investment you may have little or no diversification
  • If the value of the property goes down you could end up owing more than the property is worth, this is known as negative equity
  • There are very high entry and exit costs such as stamp duty, legal fees and real estate agent’s fees
  • Don’t invest only in property

  • If you invest exclusively in property, you will have a lot of money riding on one small market sector, for example the North Sydney apartment market. If you also own your home, you will have all of your wealth concentrated in the residential property market.
  • This is poor diversification and increases your risk. Investments such as managed funds and ETFs allow you to invest in a broader range of assets, which will reduce your overall risk.
  • About Gai Kroczek

    Gai is the Owner/Manager of Total Care Property Management together with Bernie Kroczek of Bernie Kroczek Real Estate. Gai has been in Real Estate for over 20 years and runs a professional Property Management team utilising the latest technology to assist owners in maximising their investment while also assisting tenants.

    Gai is also the web designer and maintains all the office technology keeping abreast of all the many changes and implementing them to make sure our owners get the best possible service.

    Like what you see? Why not give us a review. Just click on the Review box towards the top of the sidebar. Thanks!