Property investment

Property is a popular investment among Australians. Real estate is something we know and understand, and property is a tangible asset we can see and touch.

Property investment – very compelling

As a landlord, your property investment will generate regular rent. This is extra cash to live on, and the rent can help meet the costs of the investment. Importantly, a well chosen property has the potential to rise in value, giving you capital growth over time.

An investment property can also provide potential tax savings. Many of the costs of owning a rental property can be tax deductible, making your investment more affordable.

There are two main types of property investment to choose from.

  • Residential property; including houses, units or townhouses.
  • Commercial property; chiefly made up of offices, shops and warehouses used for business purposes.

Residential properties tend to experience lower vacancies and higher demand.  A commercial property can offer longer leases, and the tenant usually pays maintenance costs. However most investors prefer residential property because it’s something we’re usually more familiar with.

Your property investment strategy

The type of property investment best suited to your needs will depend on your goals. Some landlords want to make money on the rising value of the investment property through capital growth. This may mean buying in an area where property values are likely to rise due to population increases, or growing lifestyle features like cafes and shops. Values can also increase in older suburbs where property renovation activity is strong.

Other landlords focus on the rental yield of their investment. This is the rental return your property investment earns compared to its market value.

Generally speaking, capital growth tends to be stronger for investment properties located in and around capital cities. Rental returns on property are often higher in outer suburbs or regional areas where capital growth can be lower.

It’s also worth thinking about the type of investment property you’d prefer. Units and apartments often require less maintenance than a freestanding house, and they can be more affordable. Houses will benefit from growth in the value of the land they’re built on.

A newly built investment property can offer greater depreciation benefits than an older property. However, there may be good opportunities to improve the value of an older property through renovations.

Flexible property investment options

An investment property can be held in your own name, owned jointly with a friend or partner, or held in a trust or company. You can also hold your investment property in a self-man­aged super fund. Either way, it’s important to get the ownership structure right at the time of purchasing the investment property as it can be costly to alter the title deeds for the property later on.

A key decision is whether you want to be a hands-on landlord and manage the investment property yourself. You can choose the convenience of using a professional property manager, but this will mean paying property management fees.