subject: Assessing The Benefits And Risks Prior To Property Investment [print this page] Purchasing property for the sake of investment can help to reap rich rewards and thus create long-term opportunities for wealth creation. But it is necessary that you are completely aware of the pros and cons of property investmentbefore you decide to take the plunge.
Make an Assessment of the Benefits/Rewards
It turns out to be reassuring to be aware of the fact that your money has been invested in real estate property than in shares. You can take the counsel of property management companies. It can provide you with reasonable return and security. The additional benefits of investing in property include:
Good Returns: The rental price hardly diminishes which implies that the returns from an investment property are constant.
Tax Deductions: You can claim a number of costs as tax deductions that includes insurance, management of agent fee, any repairs that are necessary to the property and building depreciation allowance.
Long Term Wealth: A number of financial advisors are of the opinion that an investment property should be retained for a period of at least a period of seven to ten years as it is the average span of a housing cycle. In an ideal case, you can see your investment mature and worth double the amount as its initial value.
Negative Gearing: This refers to the tax deductions that arise out of an investment property and thus exceed the income that is created by the property. You are thus entitled to enjoy all the tax advantages by negatively gearing the property that you have invested in. Therefore, you should get advice in this regard from your accountant.
Value Addition: When you own a property, you are in prefect control of the same and gain valuable returns from renovating the property.
Making an Assessment of the Risks Involved:
Before taking a final decision on your investment, it is necessary to be aware of the risks involved. It is necessary to purchase property after careful assessment of the risks.
Stamp Duty & GST: The stamp duty and the legal costs are charged on each of the properties purchased. You also need to pay GST on repairs and maintenance, the construction of a new house, estate agent fee and renovations.
Tenant Vacancies: This can result in your vacancies to run at a loss and therefore you need to be absolutely sure of the demand for the rental property in a particular area.
Low return, Low Risk: Unlike an investment in the stock market, the chances of reaping financial rewards of your investment for a long span are far less.
Cost of Maintenance: Property management can turn out to be an extremely expensive affair and maintenance a costly affair. To it you can add the cost of hiring a management agent and you need to adopt a comprehensive building inspection plan.
You can take the advice of a property management expert, before investing in a property. They can guide you about where to invest so that you can reap rich rewards in the future.
