Most people are scared to invest in real estate and it is completely understandable. Buying real estate is expensive and if you don’t have the proper knowledge about the market, it could be a financial disaster.
Given that you have the necessary knowledge or you hired someone who has experience in dealing with the real estate market, the benefits could be more than you could imagine.
Given the pandemic, investors are still buying properties anticipating that when the economy returns to normal, there will be even greater demand for real estate. This is true especially for those located at the heart of cities where people and businesses want to be near infrastructure, social activities, and premium healthcare.
Reasons to Invest in Real Estate
Even during the global situation, property values in Australia are still on the up and up. Studies have shown that real estate prices are seeing double-digit increases since last year. And despite covid concerns, growth is still expected to occur.
Owner-occupiers, first-time homebuyers, and investors are still keen on buying up real estate and because there is a shortage in available properties, they are only driving the price up further.
Our team has compiled the following reasons why real estate investment should be on your list to achieve financial freedom.
As you pay off your mortgage, you will be able to build up your credit score and be able to have equity in your property. This is a good thing to have if you want to continue investing in real estate because it builds up your portfolio and will allow you to apply for loans that would otherwise not be available to you.
The global economy is recovering. That's why our team can't help but feel that real estate prices will continue to soar in the next few years. After all, it is the ideal place to store your money. In many ways, real estate is like a stock market. It is a good place to put your money if you are able to consistently earn a healthy return.
Cash flow is the net income from a real estate investment after mortgage payments and operating expenses have been made. Although rental prices are falling at the moment, it is still a source of passive income you otherwise would not have.
Predictions by experts are leaning towards the rental prices increasing in the next few years, so you might be experiencing lower prices today but that will gradually increase in the future as the economy stabilizes again.
There are many deductions property owners can take when having your property rented out. Interest, rental costs, depreciation, and different expenses related to the property can reduce the amount of tax you have to pay.
- Interest. You can claim interest charged for loans as a tax deduction when the accounts in question are used for investment purposes.
- Rental Costs. Over time, rental costs such as advertising, land taxes, upkeep, insurance, and agency fees add up to thousands of dollars and all that can be tax-deductible.
- Depreciation. Wear and tear are inevitable for almost everything. This comes built-in when you purchase the property and is a sure deductible amount every single year because it affects the financial value of your real estate. Let’s say you invest in a brand new brick retaining wall in year one and sell in year 10 of ownership, there will be some depreciation in the value of the retaining wall which can be a deductible item.
- Holding Costs. These refer to the costs an investor occurs before the property is ready to be rented out to tenants and start earning income.
These deductions are beneficial to homeowners, a consultation with your local accountant will help you make sure that these deductions are made correctly and will save you money.
Appreciation of Property Value
Real estate investing has always been perceived as a speculative tool and a high-risk investment. Even a few years ago, it was not a topic of interest for most people. However, things have changed.
Now, there is a growing number of people who have experienced real estate investing and they have started to understand the concept. There are also people who have made huge profits from it.
As long as the market keeps on growing at the same rate, property prices will continue to go up as the years go by. Apart from earning monthly income, this aspect of investing in real property is one of the most enticing to investors.
This gives the investors the ability to buy, earn money from the property while waiting for its price to appreciate, and then sell it at a premium in order to invest in another property that offers even greater cash flows.
How to invest in the real estate market?
Decide on the location of the property
Investing in real estate is an excellent way to build wealth over time, but if you're not careful about your choice of location, it can be a bad choice. Location is a key component of real estate investing, and if you're not careful, you may end up with an investment that costs you wealth.
Real estate is expensive and unless you want to pay for it using cash, you will need some sort of financing to help you acquire the property. Our team recommends getting preapproved before going property hunting.
Financing options to consider include a conventional mortgage loan, asset-based loans, home equity loans, hard money lenders, and private money lenders.
Conduct Investment Property Analysis
Once you find your ideal properties to invest in, it is vital that you make an analysis of each one’s profitability. This can be achieved by consulting with experts and doing your due diligence with current market conditions research.