Join the Millionaires
Most Millionaires Invest in Property
Analysis of the Business Review Weekly (BRW) “Top 200” (wealthiest people) over the last 10 years shows that overall, property stands out as the most important single source of wealth, well ahead of service and manufacturing industries.
There are several key factors that make property a sound long-term investment.
Strong demand – due to the largest immigration program since the 1960’s and the knowledge that one in three Australian households rent.
Scarcity- Our rate of new home construction is declining. Figures show that 140,000 new dwellings were constructed in 2008 – well below the estimated 200,000 required by the Commonwealth Treasury. Source: HIA media release Dec 2008
Ongoing rental income – generally speaking investment properties can expect ongoing rental income. This is a very stable source of income.
Long-term capital growth - in addition to regular rental income, property investors can expect to earn long-term capital growth.
Worth while remembering that property should always be regarded as a long-term investment, at least 5 to 7 years as this allows returns to be evened out over periods of market highs and lows.
Tax friendly returns – If you have held onto a property for greater than 12 months, only 50% of any profit on the sale of the property is taxed.
Portfolio diversification – Golden rule of investing is not to put all your eggs in one basket. Property returns generally are far less volatile than those of, say sharemarket. Property investment can add valuable diversification to your portfolio.
Gearing
- Negative Gearing describes the situation where the costs of owning an investment exceeds the returns it generates. This shortfall can be claimed as a tax deduction that is reducing the expected tax on other sources of income.
- Positive Gearing is said to be when an investment property’s rental income exceeds the expenses associated with owning and managing the investment. The benefits of owning a positive geared property is that it provides an extra source of income.
All investment involves RISKS. Gearing increases risk, and risks can result in losses. Whether you are a beginner or a seasonal player in property investments, one cannot stress enough the need to seek financial & legal advice prior to entering into a contract to buy.