The Advertiser - Real Estate
Maximise investment reward
If you’ve held a sole property for the last few years, now could be a great time to start thinking about your next purchase.
You can’t go past residential property when looking for a profitable long-term investment. I’ve been investing in property since the age of 22 and over this time I’ve learned the benefits of property investment can often far outweigh other investment avenues such as shares and business.
Residential property is a solid basis for any wealth creation strategy. It’s a safe asset that doesn’t normally bounce up and down in value and it will never be worth nothing – it’s solid bricks and mortar, and land.
Despite the merits of property investment, of the Australians who own investment property almost three in four, 72.8 per cent, only owned one. So why don’t more people take the plunge to investment property number two? Almost four in five (72.8 per cent) Australians only own one investment property, so why don’t more people take the plunge to investment property number two?
There are several deterrents that hold people back from a second investment, which include extra finances needed to fund the difference between rent and a mortgage, fear of a market crash, and a belief it’s best to pay off your home and nondeductible debts before you reinvest.
While the above arguments have some merit, the interest you save from paying off your debt first is nothing compared to what you could make through a second property investment. Rather than paying one dollar off your home loan, you might be better leveraging that dollar and buying five dollars of property which rises by more than you might be saving. From my experience, if you buy a property at a reasonable price and hold on for the long term, you’ll make money. Investing in a second property isn’t necessarily a big risk, especially if you already have existing equity behind you.
When it comes to purchasing a home, the fact is, most people make a successful investment. As you’re going to live in it, you do lots of research and have a good understanding of what local buyers want and what they’ll pay. If people use this same logic for further property investments they will generally make money too.
So, if you have made money from your first property, doesn’t logic suggest you keep repeating to make more money?
While the current market does have higher property prices, making it harder to raise a deposit, you could use the equity in your home and other investments to finance your next investment.
From your first property purchase, there’s a good chance you might have experienced 10 to 30 per cent growth which is now potential equity. You may be able to use that equity to pay investment costs such as a 20 per cent deposit, five per cent stamp duty and buyer’s agent fees.
The cost of putting off your decision to invest again can be very high, so if you can afford to buy a second property, why not make the decision to invest this winter. Buying a second property doesn’t have to make your lifestyle suffer – it could actually enhance it.