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Should I invest in property?

Owning your own home and investing in more property is considered the ‘great Australian dream’ for many of us. This dream was passed on to us from our parents and grandparents who, if lucky, were able to hold down a good job, pay off their own home and then consider buying a second property. But most of the time, that’s where it stopped.

Did you know that less than 6% of the Australian population (which just tipped 24 million!) own one investment property? And less than 0.50% of Australians own three or more properties. And less than 0.07% of Australians own six or more properties. Can you believe that??!!
So, this means of the 1.7 million people who invest in property, less than a percent of those own six or more properties. That’s such a small portion of our population!!

You could look at those stats in two ways. You could say that investing in property is really hard and not many people can do it. Or, like me, you could look at it and say ‘I want to be part of the 0.070%!’.
In my first year of investing, I never thought I’d be part of that very, very small group of investors who own six or more properties. But over time, and with education, commitment and consistency, you too can be part of the group that I like to call the ‘1%ers’.

So, you’ve wanted to invest in property for a long time.
Have you ever asked yourself WHY you want to buy property?
WHY you think it’s a good idea?
I wanted to change the course of our financial future. In the beginning, I had no idea how property was going to do that for us but I just knew that it would. As the years pass and as my portfolio grows, I know that I’m building as asset that that will create long term wealth and financial security as I look to move away from the 9-5 corporate structure. By investing well and knowing which moves to make and at what time to make them, I will be able to live a life by design and be supported by the income of my property portfolio.

Now I know that property investing isn’t for everyone … but if you’re thinking about it, here are some pro’s and con’s that you should consider:

PRO’S
1. Anyone can do it – you don’t need to know everything there is to know about investing before buying a property.
2. It’s a stable investment – unlike the stock market, property is considered a much more stable investment. It’s no secret in Australia that our population is growing faster than the rate in which we can supply housing. And it’s considered (by the ‘experts’) that every 7-10 years, property in Australia doubles in value. So if you hold on to it long enough you’ll most likely come out winning.
3. Increased Value – if purchased well, the value of your property will increase over time. This will also provide you with good monthly income through the rental payments.
5. Tax Benefits – if your property is negatively geared (it costs you more money than what it brings in), it may provide you some tax benefits at the end of the financial year. There are also quite a number of deductions that you can claim on your tax return which will be offset against your income.
6. Control – you are in full control of your property which means you can make all of the decisions.
strong>7. – purchasing a property with the intention of holding on to it for a long period could turn out to fund your retirement. And as the value of your property goes up, so does the rent which means you can either use the cash flow to retire comfortably or buy another property.
8. It can make you money – if the rent you receive is more than what the property costs you (including all expenses), you’ll essentially have someone else paying for your property. And over time, as the mortgage decreases, your positive cash flow increases. And even better than that, if you do this with enough properties, the cash flow will eventually fund your lifestyle!

CONS
1. Bad tenants – This is probably everyone’s worst nightmare! Damage, not paying rent and sometimes refusal to leave a property, are all problems that you could face as a property owner. Some issues could take months to resolve and can be very stressful.
2. Hidden and ongoing costs – After the upfront costs of purchasing a property, you need to be mindful of the ‘other’ costs that can come up. Maintenance and repairs, fitting out the property, insurances, taxes, rates, water … the list goes on! Especially in older buildings.
3. Expenses to start – property investing is very expensive to get in to when compared to buying shares or even silver. There are ways to purchase a property without a deposit, but if you don’t know these, it will almost certainly stop you from ever entering the market.
4. Vacancies – When you don’t find a tenant and there is no-one paying rent, you’ll need to cover the mortgage repayments.
5. Other costs – Although negative gearing may offer tax deductions, you will need to consider and budget for the shortfall between repayments and rental income as well as the cost to cover repayments when the property is vacant
6. Time on the market – if things get really bad and you need to sell, this can often take time. Unlike the stock market where you can sell at a moment’s notice, you’ll have to wait for a buyer who is willing to pay your asking price.
7. Interest Rates – if your loan has a variable interest rate, this may put the pressure on your finances if the rates go up.
8. Lack of diversity – sometimes it’s risky to put all of your eggs in one basket. If the market changes significantly, you could be facing a disastrous outcome. This could be overcome by having a range of different investments or better yet, getting really good at property investing so that you lower your risk of failure.

Yes, there are advantages and disadvantages when it comes to buying property, just like there are advantages and disadvantages about pretty much anything that is considered a big purchase. But that doesn’t mean you don’t do it. Look at the pro’s … look at the con’s … and weigh up which sits more comfortably with you.

If you want to make it work, then do what you need to do to learn as much as you can because the difference between those who succeed and those who don’t, is EDUCATION. Know what you are getting in to, know the options available to you, know the potential risk associated with it, and know how to make it work for you.

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