People love to invest in property because it gives them a variety of financial benefits. Unlike stocks and bonds, real estate properties can actually be seen and touched. This gives people a greater feeling of financial security and peace of mind.
Besides, real estate typically won’t lose value in the long term. As the population grows, the demand for real estate is increasing all the time. Since there is only so much real estate in Australia, the higher demand, the higher the value.
You might think that investing in property is way out of your budget. However, you only need to make a 20-percent down payment in most real estate transactions. The rest of the money can be financed by a mortgage or personal lender.
Meanwhile, you can receive the financial benefits of owning the property as you’re making monthly payments on it. In most cases, you can use the money you receive from owning the property to pay back your lender. That means no more money out of your own pocket.
To help you understand how you can increase your wealth by investing in property, we’ve provided seven indisputable ways owning real estate can increase your wealth:
When you invest in real estate, you don’t have just to let it sit there unoccupied. You have the option to rent out your property to eligible tenants and earn a steady passive income from their rent payments.
The only things you’ll need to worry about are fixing things on the property and making sure your tenants pay on time. If you own an apartment building or multiple properties, you could always hire a property manager to take care of these tasks for you.
Appreciation and Capital Gains
The demand for real estate almost constantly increases as the population increases. Whenever there is more demand for an asset, the value of it increases, as well.
Even though real estate values tend to fluctuate, they will usually increase over time. Just pick the right location for your real estate investment and watch it appreciate a little bit each year.
Meanwhile, if it is a rental, you can have the rental income take care of your loan payments. Then you would just be owning appreciated property and not spend any of your own money in the process.
If you purchase a piece of property in a desirable area, you can bet that it will be even more valuable and desirable 30 years from now.
The same cannot be said for stock investments because their fate depends on the vitality of companies. Real estate values depend more on the national economy rather than individual entities.
There are a lot of tax benefits to owning real estate that new investors tend to overlook. For instance, if you are receiving rental income on an apartment building, you will not have to pay self-employment tax on that income.
Also, you are entitled to numerous tax deductions for various aspects of your property, such as depreciation, local property taxes, travel expenses to get to the property, maintenance expenses and insurance expenses.
If your investment property has been owned for longer than one year, then you get to pay a lower tax rate, too.
Equity can be defined as the property’s value minus the mortgage debt amount. If your mortgage is higher than the property’s value, then you don’t have any equity.
However, as you continue to make your mortgage payments and lower the debt, the value of your property will increase. This means its equity will increase as time goes on.
In addition, you can take out a loan against the equity while you are making your regular mortgage payments.
When you purchase real estate, you have power and control over it. The same cannot be said for stocks because even though you purchase shares of a company, you do not have decision-making power in the company unless you are a majority shareholder.
Most likely, you are not a majority shareholder. This means the value of your investment is out of your control.
Fortunately, with real estate, you have the ability to make it more valuable with improvements, tenants, maintenance and so forth.
As previously mentioned, the demand for real estate will always be great. People need a place to live, whether they’re renting or buying property, and businesses need a place to set up shop.
If you set your rent price competitively, you should always be able to find a tenant who is willing to rent it.