Investing in real estate has long been a favoured method for Australians to generate wealth. While there have been a few economic hiccups along the way, property researchers have stated that since 1926, real estate grew at a comparable rate to shares, with a lot less risk involved. It is also an uncomplicated investment strategy when compared to shares and others.
Investing in Property Requires Little Specialised Knowledge
For someone with little understanding of, or interest in share trading, options, futures, gold and other investment strategies, real estate is an area where most people already have some knowledge. Anyone who has rented a place to live has experience of lease agreements, bond requirements and interaction with real estate agents. Deciding to invest in real estate, either for their own residence or as an investment utilises some of that existing knowledge.
We believe that investing in real estate is the best way to a financially secure future. These investments don’t need to be in multi-million dollar properties in prime locations, in fact, outer suburbs and regional cities offer a lot of potential. Our agency, Prudential Real Estate, services the dynamic, south-western area of Sydney.
Lenders Favour Real Estate Over Other Asset Classes
There are many other advantages to investing in real estate in Sydney besides its ease of access for the average person. The major one is that lenders also favour real estate before other investment types. They will offer up to 95% of the value of a residential property to an investment borrower at a lower interest rate than any other class of asset.
Generous Taxation Incentives Offered
The Australian taxation system also offers several incentives to attract investors into the real estate market. Negative gearing allows investors to write off all investment expenses against their taxable income, effectively lowering the point at which they pay tax. When negative gearing was introduced in the mid-1980s it gave ordinary wage-earners the opportunity to enter the investment market, and has continued to attract people to residential real estate.
Depreciation, that is, the decline in value of the property and its fixtures and fittings, can be claimed against taxable income. This may not amount to much if the property is new, but in an older house or unit, items such as light fittings, window and floor coverings, ovens and cooktops will have deteriorated. This loss in value is an allowable tax deduction.
Care Free Property Management
A major advantage to busy people who have no desire to manage an investment property is that it can be placed in the hands of a property management agency in Sydney like Prudential Real Estate. We find suitable tenants, perform inspections, arrange the tenancy agreements, report to the owners on the condition of the property and collect the rent. It is almost a “set and forget” investment strategy, which could be why it is still so popular.