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The advantages of investing in property culminate in one simple fact – if done right you can make a lot of money from it. Now, the tricky part is investing in the right property and being savvy about your investment.
That said, being in control of a tangible asset has a lot of people jumping on the property investment bandwagon. Here are the top 6 reasons why we think it’s a wagon worth riding.
One of the great advantages of investing in property, as opposed to other investment opportunities, is that you have control. You’re not dependent on the decisions of others; you have the power to make your money work.
You can do the research, select the right property and make improvements. What’s more, if you’re buying to let the property you can choose how much you rent it for and select and manage your tenants.
The property market is more stable and dependable than others such as stocks and shares. Just think about it, there will never be more land but population growth is a certainty meaning that there will always be a demand for property.
As such, banks are more likely to lend money against the property, which makes it easier for you to get started. Also, due to its perceived stability, banks are likely to offer a much higher loan to deposit ratio than for other investments. This is known as leverage and enables even those with relatively small savings to invest.
Real estate reacts proportionally to inflation, unlike other investments. This means that the value of your property should increase over time. The Economist’s Global House Price Index shows that property prices continued to grow in 2017. This means that regardless of your initial deposit or, indeed, the location of your investment you have the opportunity to make money.
The equity in your property is the difference between the value of the property and your mortgage. Even for a highly leveraged asset, you have the opportunity to make significant capital gains.
If the rent on your property is higher than your mortgage you’ve got money in your pocket straight away. Meanwhile, your investment is still safe as the property value continues to increase. There are some simple but useful formulas to help you identify rental properties that will prove to be profitable.
The cap rate is the net income divided by the asset cost which gives you an annual return on investment in terms of rental income. The one percent rule states that the gross monthly rent needs to equal at least one percent of the purchase price to be worth considering. The Balance offers a breakdown of these and other formulas, which can help you evaluate the financial viability of your investment.
Once you’ve invested in one property you can use the equity in that property against a loan on another. This allows you to start to build a portfolio of properties and turn an investment into a potential business. Investments in property don’t just have to be in the domestic sector.
According to The A Team Property Group (http://theateampropertygroup.com.au/), four key areas within commercial real estate will present opportunities in 2018. These include debt, logistics, retail and alternative sectors such as student and senior housing.
Owning a rental property allows you to deduct certain expenses on your taxes. This can make owning the rental property even more profitable. Potential tax deductions include maintenance costs, interest on mortgage payments and insurance.
That is just the tip of the iceberg though; you can also deduct tax against travel expenses, home office expenses and legal fees. As long as the expenses are considered necessary in line of your rental business there is a potential tax saving.
In summary, many people are turning to property investment as a means to make up for reduced interest rates and to have control over their money. Property investment is a tangible and improvable asset. If researched and planned well you should see a good return on investment and the possibility for a sustainable business. If this sounds like it could be the way forward for you then bear in mind the following points to get started: