Property is a popular investment choice for Australians but deciding if it is the right place to invest your hard-earned money can be a difficult one. Consider the pros and cons before you dive head-first into a long-term investment. This will put your mind at ease and allow you to suitably assess if property investment is right for you.
What is an investment property?
An investment property is real estate that is purchased by investors for investment purposes. Investors usually rent out the property and use the income received to pay off their loan with the intention of owning the asset and possibly generating capital growth by selling it for a higher price than the original purchase price.
An investment property can be in the form of residential such as house, unit and townhouse or non-residential such as land, commercial or an industrial property.
Purchasing an investment property is a popular choice for investors in Australia as the market can be safer and less volatile compared to other investments, however there are no guarantees and still has its disadvantages.
The pros of property investment
- You can earn rental income from having tenants rent out your investment property.
- Benefit from capital growth if you buy at a good price and the property increases in value.
- The interest on an investment home loans is tax deductable.
- Property investment can be less volatile than shares.
- Unlike shares, your property is a physical investment that you can see and touch.
The cons of property investment
- Your rental income usually won’t cover your total mortgage repayments so you may have to invest some of your income for repayments and expenses.
- You are a slave to the property market; Interest rate rises will affect your return and put the pinch on your disposable income and if the property market goes down, so too does your investment.
- Unlike shares you can’t just sell off a section of you investment if you need some quick cash.
- There are high entry and exit costs associated with property investment.
- If you go through periods without tenants you have to be prepared to cover the entire costs.
If you’ve weighed up the pros and cons and think property investment is the right next step for you, jump into our home loan comparison page and mortgage repayment calculator to get started on your investment calculations.