Most Australians love the idea of owning an investment property. However, only 7.9 per cent have acted on the great Australian dream.
When considering your options for acquiring an investment property, Newcastle Financial Planning Group believes having a clear purpose is fundamental to your long-term outcome.
Whether it be Capital growth, Income or Taxation benefits, you need to have clarity before making an investment decision.
Considering Property for Wealth Creation?
When utilising property for wealth creation, there are several factors to consider:
- Location, location, location: over 80% of the reason for capital growth can be linked to the location.
- Tax benefits: such as deductions for rental expenses and negative gearing may grant access to capital gains tax concessions when you make a profit on the sale of your investment.
- Additional source of income: particularly beneficial when approaching your retirement.
- Building a property portfolio: using equity propagated from your existing property/ies may support your overall financial planning or retirement position.
- Equity: is the current value of your property, minus the amount you owe. How can you best utilise the wealth you have created?
Alternative ways to invest in property
You may consider opportunities that allow you to purchase a portion of a property alongside other investments – such as investing in property through the listed investment options available on the (ASX)Australian Stock Exchange.
Some benefits of investing this way include greater liquidity, diversification across different assets, and lower transaction costs. However, be aware that share prices rise and fall daily, unlike bricks and mortar which are seen to be less volatile. Some examples are outlined below.
Real estate investment trusts
Real estate investment trusts (REITs) are a type of property investment trust that pools investor funds and invests in different real estate assets on your behalf. These can be listed on the ASX and you invest in their shares. REITs can provide you with exposure to the property market that is more diversified than buying a single property, so it doesn’t rely on a single property value for generating returns.
Invest in home construction
There’s big business in building new suburbs or apartment complexes, and with that comes opportunity to buy shares in the businesses that develop these properties (property developers).
It’s worth noting that investing in construction development has different risks to investing in non-development REITs or property, so make sure you understand the investment risks before you make a move in investing.