How an Investment Property Can Fit Into Your Financial Strategy
Property, along with shares/equities, represent the two major asset classes for growth-focused investments. Each investment has its own pros and cons.
Some of the advantages of property are:
- A real, tangible asset
- Less day-to-day volatility
- Strong ability to leverage
- Substantial tax deductions
Some of its drawbacks are:
- Lack of liquidity
- High upfront transaction costs
- Less ability to diversify
We recommend you speak to an independent financial planner if you are unsure which asset class suits you best.
What benefits does property investment offer to your financial strategy?
- Long-term growth. Property is a proven performer in delivering strong investment returns. Average returns between 1991-2011 were 10.2% per annum. I am always careful about predicting future returns, and property investment isn't about short-cuts - you will generally need to hold an asset for the long term. But the right property held for the right time is a terrific and proven path to wealth creation.
- Sensible leverage. Property allows you to borrow more and cheaper debt than any other asset class. A well-developed finance strategy can help you purchase a high-quality asset for the long-term, as well as improve your cashflow and encourage you to save.
- Tax efficiencies. You should never invest purely to reduce your tax - after all, it's better to be making money and paying tax than losing money and not paying tax. Nonetheless, property does offer some tax deductions which can make holding your investment easier, particularly in the early stages. These include interest payments, depreciation and property maintenance, all of which can be offset against your taxable income.
Overall, a high quality property investmentthat is well-structured and sensibly leveraged can be a high-performing plank of your financial strategy.
Want to discuss in more detail how an investment property can fit into your financial structure? Instantly book in a free consultation here.