Some people see property investment as the only way to build wealth, while others see it as the worst way to do it.

The truth is it can be both, as it depends on your individual circumstances and the individual investment property.

These are the ten main reasons why people should invest in property.

1. You can use other people’s money

Banks love lending to property investors. If you have enough equity in your own home, they might even lend you 105% of the purchase price of the investment.

2. Leverage

If you borrow 105% of the property price, the capital gain can significantly grow your wealth. If you buy a house that costs $500,000 and it grows in value by 25%, you have added $100,000 to your wealth. If, over several years, the property doubles in value, you will have added $500,00 to your wealth, all using other people’s money.

3. Demand

Property will always be in demand. Shelter is one of the basic needs and everyone needs a roof over their head. In Australia, there is a significant shortfall in the number of new homes being built, and this is likely to continue for years to come.

4. Property will never be bankrupt

Residential property won’t become bankrupt in the same way that businesses can.

5. Too big to fail

The Australian residential property market is valued at around $10 trillion, and over 60% of Australians have an investment property.

Compare this to the total value of listed Australian companies, which is only $2.3 trillion. Governments will do anything they can to stop property prices from falling, as the implications can have far-reaching consequences on the economy.

6. Vested interests

In 2021, the census showed that 86% of federal politicians own an investment property. Anthony Albanese and Peter Dutton each have three investment properties. As the saying goes, always back the horse called self-interest.

7. Owner-occupiers dominate

Around 70% of the residential property market is owned by owner-occupiers. This provides a safety net regarding potential falls, as owner-occupiers will do anything to keep their home.

8. You can add value

Residential property is one of the few assets you can add value to. You can renovate or add features like solar panels or an outside deck, which can result in higher rent.

9. Rent increases over time

Not only can you get capital growth, but the rent also increases over time. Over the last six years, average rents have increased by an average of 3.5% per year.

10. Tax benefits

Finally, if you lose money on an investment property, the Government allows you to claim this as a tax deduction. This makes it easier to absorb the loss.

If you want help pointing you in the right direction, book a chat via the button below or contact us on 02 6269 3339 or at team@constructwealth.com.au.

About the Author
Phil Harvey is an independent financial adviser. In 2017 Phil set up his company Construct Wealth to help clients best manage their finances so they focus on what is important to them. He is a founding member of the Profession of Independent Financial Advisers and a tax financial adviser, registered with the Tax Practitioners Board.

General Advice Warning
This advice contains general information. It may not be suitable to you because it does not consider your personal circumstances. Phil Harvey and Construct Wealth are authorised representatives of Independent Financial Advisers Australia (AFSL 464629)

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