Invest in property

Invest in property

Recently in some newspapers, bricks and mortar have taken a bit of a kicking but we still believe its one of the most robust investment classes that can be utilised by Australians .

There’s a reason why ‘safe as houses’ is a popular term.
According to research by AMP, Australian property has increased in value at a rate comparable to that of the share market since about 1925 – which is an average of about 11.2% per annum.

And this is during times of war and other natural disasters.
And it does not have the volatility of the shares market of course.
Which to our way of thinking makes it a safer bet.

Now shares do have slightly higher capital growth, but the difference in risk is huge between the two asset classes .

Variation in returns and capital growth or for that matter loss on shares can range from +30% in a year to -30% and we are talking just over a week.

But we do not see that type of variability in property !

And too a certain degree you don’t need specialist knowledge to start investing in property all over this country.
You just have to take due diligence of course.

What is interesting is that there are rich property investors here that had no intention of making a fortune.
Instead, they just bought a house to live in.
They watched the value grow and then extrapolated that to other houses and areas.
Don’t forget, all areas have cycles and cycles within cycles.

To play the stock market now days require a great deal of knowledge.
Especially with entities like high speed trading bots that humans cannot compete with.
And the issue is, do you have time to research the financial press, annual reports and company press releases ?

We certainly don’t have that time.

With a decent broadband server we just jump online and start looking at interesting properties.
Of course there is  more that to acquiring property  than just picking a property, but a significant amount of research can be done online if you at least roughly know what you are doing.

Now days, its relatively easy to get finance
It might feel like it is hard when you’re applying for a mortgage, but banks like home loans since they are usually a driving factor for a bank’s business model.

They are also more likely to lend on residential property than any other type of asset class and will often lend a higher proportion of the value and at lower interest rates, for property than virtually any other asset class.
And this includes commercial property.

Overall this tends to make it easy borrow to invest in property.
The secret word is of course leverage.
Essentially you can borrow more using property than trying to use a blue chip share portfolio.

If two people are in the same job, with basically the same income, same assets and considered to be essentially a similar risk by the bank then there is a good chance the bank will allow for up to $440,000 for a loan for a house.
But their their workmate desiring to invest in a different asset class like shares for instance might be limited to less than $300,000.

At the end of the day, the greater the amount of leverage you can access using property is what makes property so damn good.

No matter what your financial aims are, you should be able to find an investment strategy for property in Australia that suits you.

And Property historically has proven time and time again its ability to deliver decent capital gains provided you have chosen the correct area with the right timing in the cycle.

Perhaps you were looking for a positive cash flow ?

Then you would be choosing properties where rents are higher than outgoing costs.

Or you might be interested in a renovation job to add value to the proper before you end up either flipping it or renting it out.

There are things you can do that add value to a property but there is nothing you can do yourself that will add value to your shares per se.

And for investing in the sharemarket, you would typically need to hire a broker to handle your trading decisions.

And you are relying on fluctuating market conditions and the actions of the people that are running that company.

This creates a level of uncertainty in values.

But with property, once you’ve settled, you directly own the asset and you have complete control over whatever happens to it.

Perhaps you are more interested in the subdivision of your property ?
As long as the zoning laws are applicable of course.

Find a property on a big enough block, in an area that’s zoned correctly and then via the local council divide the property and sell off parcels.

Or follow the largest possible risk with the considerable reward.
Subdividing and building either units or townhouses.
The profits can be substantial if you can get it right.
Just do not make the same mistake developers made recently in Brisbane when they produced too many units over a short space of time which has lead to a glut of units for the moment.

Which is great for renters as it can force the prices down in some areas.


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