It has been repeated time after time.
- Investing in the property market is a safe bet.
- Investing in property is guaranteed returns.
- You’re investing in something you can see, touch and smell.
- Investing in property equals big tax incentives.
There are more but you get the idea.
As responsible Real Estate Agents and Property Managers Bunbury Real Estate feels it prudent to assist our customers in making an informed decision.
The Risk and Pitfalls
The risk on an investment usually refers to the amount of money being injected into the deal. The more cash you have of your own the less the risk. Therefore, it makes sense that it follows that the more you borrow the greater the risk.
The pitfalls of the investment can be many and varied depending on each individual case. The more common pitfalls are:
- Large entry costs by way of stamp duty, pest and building reports, conveyancing and transfer costs, and legal costs including searches.
- Ongoing repairs and maintenance
- Council rates
- Water rates
- Body corporate fees
- Land tax
- Management Fees
Alright now! We’ve done the main course, let’s get down to the cake!
In the same way you would calculate the many facets of risk, you must also study the level of investment returns. It is only when these two things are in balance in YOUR world, should it be right to move forward with ANY investment.
So what aspects should you consider when calculating the real and forecast rewards we speak of?
The three main aspects to consider are:
- Rental Income
- Tax Benefits
- Property Growth
For some investors, taking a hit on income for high growth could be a winner. For others, it may be having that long-term investment that actually contributes to your income.
As the owner of an investment property you are able to claim against the expenses on all the items listed above in Risk and Pitfalls against any income received, over the term of ownership.
The other great advantage is being able to depreciate all the items held within the property such as hot water systems, floor coverings, air conditioners and many more.
On a Final Note
Whilst we may be a little biased in believing property is the best kind of investment, we also believe and recommend diversifying your portfolio as another method to assist in balancing your risk and return.