Why property investing is worth getting right

Do you know why most people want to invest in property?

For most the answer is simple, to create a more comfortable life for themselves and their families, and for those getting it right, that is exactly what they are achieving. The amount of people building real wealth in property is growing, so, why not also become part of the savvy Australian property investors getting it right.

It not hard to get right and it is more affordable than most people think to get started, but, like absolutely everything worth doing right you need to do your homework, learn, and take action.

Below are a few more reasons why property investing is worth getting right.

Security and Performance

As property is a physical and usable asset, it offers security not seen in most other investments. Even if the home on top erodes away, you will still have the land underneath to use in any way you wish.

Residential property has also historically been one of the highest and consistent growth asset classes over the past 90 years, along with shares. The below chart shows just the average growth, the better your real estate strategy is – where you buy, what you buy, how much land content you have, and how you finance – the better the returns can be.

“With average returns, $200,000 invested in property in 2000 is now worth $1,650,000 in 2020, just 20 years later.”

[Sources: ABS, REIA, Global Financial Data, AMP Capital]

Shares have also performed alongside property, so why not shares? A reason property can be more appealing than shares has a lot to do with leverage, as we cover in the next point. In saying that though, shares are also a great investment option and utilising both can result in a healthy diversified portfolio.

Leverage and Cash Flow

Because of the performance and security of property, banks regard residential real estate as sufficient collateral to lend up to 95 per cent of the property’s value, in the form of a home loan. This is leverage that you just don’t get with any other type of investment, meaning, you can use a small amount of money to acquire an asset of much higher value on which you reap larger returns and growth.

This high degree of leverage that property gives you is what allows you to build wealth by using only a little of your own money.

Additionally, the cash flow that you get from owning property and renting it out can cover some if not all the cost of borrowing from banks and/or the cost can offset other income streams through government tax incentives.

If you have any questions for the Aus Wealth team, leave them below.