Monday 8 July 2024

Investment Property Series Part 1 – Why to Invest in a rental property?

Investment Property Series Part 1 – Why to Invest in a rental property? 

Investing in property is one of the most popular forms of wealth building in Australian, and more and more Australians are jumping on board. Adrain Kelly, previous president of the Real Estate Institute of Australia, says Australians still view property as a “more stable life raft” than the unpredictable and often turbulent stock market. Following the stock market collapse on the early 2000s, Kelly points out that “many people wary of the stock market’s peaks and valleys are more inclined to put their hard-earned savings into bricks and mortar.” 

Regular rental yields
Rental yields provide immediate and consistent rewards for investors. Yields can be used to pay off a property, or in the case of many retirees, provide regular and highly predictable funds to live off. They can be put into trust for your children’s future or radically increase your cash flow, allowing for the purchase of luxury items and holidays.

Strong long term capital growth 
Australia’s large cities, Sydney in particular, have shown exceptional capital growth across the long term, and regular market booms over short periods. Such outstanding levels of capital gain are an incredible incentive to property investors in addition to regular rental return on investment. 

Property investment less risk 
One of the chief reasons investing in property is almost always safer than investing in stocks and shares is that it does not require specialised knowledge and regular if not constant monitoring. As with any form of betting, even the most experienced can sustain huge loses, let alone regular laypeople who comprise of the vast majority of stock market investors.

Property is a tangible asset
Investing in a physical asset that you can see with your own eyes, inspect inside and out prior to purchase and have it checked regularly in periodic inspections to ensure its good upkeep is a major persuasive factor for many investors. Investment property advisor from Abercromby’s, Lilly Schneider, explains the physicality of property “provides confidence and total control for investors, something that isn’t guaranteed in the stock market.

Considerable tax deductions
Owning a rental property offers investors great tax benefits. Negative gearing was made available in the 1980s in an effort to encourage construction and allow the government to house Australia’s expanding population. Even more necessary today, Director of PB Property, Pina Brandi, says this tax incentive encourages investors “to buy and support the construction of more dwellings. This translates into more jobs, more service providers, more opportunities and keeps the country developing,” creating a win/win for the overall economy.

The other major tax incentive is the capital gains tax discount, introduced by the Howard Government in 1999, and allowing individual taxpayers to reduce their CGT by 50% if the asset–including property has been owned for at least 12 months.

Excellent levels of investor market confidence 
Confidence has well and truly returned to the investor market following 2022’s lull. Recent data from the Australian Bureau of Statistics shows new investor mortgage commitments have risen to 35.3%, the highest level since 2017. And this is despite the RBA’s 2022 run in consecutive interest rate hikes.

Whether you currently own an investment property or are about to acquire your first, Cramer Property has a variety of investor-perfect listings.

And for exceptional Property Management services that make renting your property a breeze, contact our Senior Property Manager, Silke Weichenhain on 0403 034 457.

Disclaimer: This article contains general information gleaned from various sources. All information is of a general nature only. This information is not a substitute for specific legal, financial or accounting advice.