Why Invest in Property?
The fact that you’re reading this gives at least some indication that you’re considering investing in property. Do you know why – can you explain it to your friends?
There are lots of reasons to invest like:
- I don’t want to work forever
- I don’t want to be a financial burden on my children
- I don’t want to be forced to stay home, pinching pennies, in retirement
- I want to retire early
- I want to help the kids or grandkids
- I want to travel when I want to
Some people think that they’ll be OK. ‘Someone’ will look after them (like the government will give me a pension). But with an ageing population there’s no guarantee that there’ll be a pension. So why take the risk?
Most people say “I’ll be right”. However the sad fact is most people are far from alright.
Have a look at the actual retirement incomes of Australians:
As you can see from the numbers, only 3.4% of people get to enjoy what we’d consider a decent income and the peace of mind that comes with it. The majority (over 82%) get to spend the 168 hours per week of their retirement years on considerably less than the minimum wage. The sad thing is, it takes very little effort to invest now to make a huge difference when you retire.
The Australian Bureau of Statistics assumes that life expectancy for men will increase to 92.2 years of age and 95.0 years of age for women by the year 2050. So if we’re going to live longer, then there’ll be a lot more years in retirement. You can choose now whether you’ll live these years in virtual poverty or be financially free to have a wonderful retirement.
Why Choose Property?
Strong Historical Performance
How many times have you said ‘if only I'd bought that property 20, 10 or 5 years ago”? The thing is people have been saying it forever.
A report by PRD Nationwide Research examined annual gross returns from various asset classes over a 20-year period to December 2003. Residential property outperformed the other investment types, including Australian Shares, Listed Property, Fixed Interest, Cash and Overseas Shares (unhedged).
Leverage
Leverage is all about using a little to get a lot. As a simplified example, if you wanted to buy $100,000 worth of shares it would cost $100,000. If they were to double in value in 10 years that’s a $100,000 return.
But if you used that $100,000 as a deposit and borrow say $900,000 on a property you would be able to buy a Million dollar property. If this investment was to double in value in 10 years that’s a $1,000,000 (One Million) return.
Everyone’s circumstances and borrowing capacity are different but hopefully you get the idea.
Safety
The PRD Report we mentioned above says “People feel safe investing in residential property as it is an asset that is tangible (something they can see and feel) and is relatively free from uncontrollable external forces”, the report says.
To add to that feeling of safety, banks won’t lend money on a property that is significantly over valued. So even if you’re not totally sure, the bank will protect you.
Another thing about property is that it has always increased in value over the longer term
So even if there are ups and downs eventually it will pay off in the end. That’s why the
PRD says “Residential property is an asset that is best held with a mid to long-term
investment strategy”.
Control
PRD suggests that one major benefit of property investment is that the investor determines how to manage the asset, rather than leaving decisions to a large corporation, as is the case with shares and listed property trusts. Of course it’s better to have confidence that you’re investing in the right property by having Stateland Properties by your side.
Tax Advantages
It almost goes without saying that there are significant monetary benefits available through negatively gearing or depreciating property.
Plus: You understand it. Properties produce income and capital growth. You don’t have to sell them to take advantage of the growth. Rental demand is on the increase, and more.