Property investment in Australia can be in a way defined as the most reliable way to build a fortune for yourself over time. It might not be as fast as the more traditional forms of investment such as crypto but it sure is one of the most consistent ones. There are many reasons why investing in property continues to be a popular choice in the Australian market.
Property is a familiar and tangible source of investment that is not only easy to research but also to understand thus making it a much less volatile form of investment when compared to its counterparts. Unlike investing in the share market, where the companies you invest in generally have their own management, you manage the important decisions for your investment property in Australia, including ways to increase its value, such as with renovations. Combine that with the fact that Property can deliver long term returns if the value of the property increases over time and that there’s also the potential to receive rent as a source of income before the eventual sale and you have the recipe for harmonious returns.
However, just because it is easy to understand and navigate doesn’t necessarily mean that it will come naturally to you. As per our experts at Nfinity financials and Pb property Investment property in Australia is a journey for the one who has mastered the art of patience as there are several steps involved which have to be taken mindfully.
HOW TO INVEST IN PROPERTY?
The journey of property investment can be traversed in one of two ways-direct or indirect.
DIRECT
Indirect property investment is one in which you invest in real estate, either through transferring ownership directly into your name or the name of your business or through purchasing units in what’s known as a direct property fund. To quote Parag Dixit an award-winning mortgage broker at Nfinity Financials “Direct property investment has the ability to generate great returns for investors.” The direct property includes assets such as commercial real estate (office, retail, bulky goods, large format retail, and industrial property investment) or residential real estate, including apartments, apartment buildings, or the average house on the street.
INDIRECT
In an indirect form of investment, you acquire property through a third party such as managed funds, property trusts, and syndicates. It usually requires a smaller investment amount or capital however it provides exposure to the broader property market including commercial, industrial and residential real estate.
The process of investing in property is, by all means, a simple process to understand however as an investor what one must understand is that investing in property and building wealth through it are not one and the same.
HOW TO BUILD YOUR WEALTH THROUGH PROPERTY INVESTMENT
Property investors in Australia usually focus on one of two strategies when it comes to building wealth through buying an investment property in Australia.
CAPITAL GROWTH
Capital growth in general simply means the increase in value of your property portfolio over time. It can also sometimes be referred to as ‘capital appreciation and can be referred to as the increase in the value of your rental property over time.
For example, if you invested in an apartment costing, say, $500,000 two years ago, and sold it for $550,000 today, the property would have notched up capital growth of $50,000.
The reason this is a primary focus point is when we buy a property for a certain amount of money, it goes up in value. If we were then to re-sell that property, however much it went up in value, we would effectively make a profit after we’ve paid all of our expenses.
The two main benefits you gain out of capital growth are-
NEGATIVE GEARING BENEFITS:
Capital growth investment properties tend to have a higher purchase price and lower rental yield. This makes them negatively geared; meaning the annual cost of your investment is more than the return. As a result, investors often need to subsidise their investment using their income or savings.
USING PROPERTY EQUITY TO BUILD YOUR INVESTMENT PORTFOLIO:
Another key benefit to a capital growth property investment strategy is that it enables you to generate positive equity and grow a portfolio faster. This means that as your initial investment property value increases, you may be able to borrow against it to purchase further investments and build more wealth.
CASH FLOW FROM RENTAL INCOME
In this strategy, you purchase a property primarily for its income-generating purposes. The property may go up in value as well but that’s more a side effect to the main purpose of the property which is to generate you a passive income.
As per experts at Nfinity financials passive income property or positive cash flow property works because the rental income coming in from the property is greater than the expenses going out.
These were the main strategies commonly used by most Australians to generate wealth through property investment. However they are certain tips that you can keep in mind before trying to grab a piece of it-
- Have a basic understanding of tax, leverage, and money management.
- Understand the differences between property and other types of investments.
- Set your financial goals and plan ahead.
- Focus on acquiring quality investments only.
- Consider tax effective ownership structures.
- Do your due diligence. Take time to study and understand the property market.
- Protect your wealth with adequate insurances.
- Seek professional advice.
To say that this is all there is to building wealth through investment property in Australia would be incorrect. However the list is long and many of its steps require expert guidance. And, these experts can be found at Nfinity financials.
