The Good, the Bad, the… well, you know how the old line goes.
Today, I want to give you some additional insight on what being a property investor is all about. The good, the bad and all the bits in between…..because when considering investing, it’s important to me that my clients know all they need before they begin.
If you hold onto an investment property long enough, it will eventually become positively geared and provide you with a relatively passive source of income. You can use this income to help fund your future lifestyle, support your community or continue to build additional wealth. The choice is yours as you have invested the time to wait for capital growth.
The Not so Good…
Not every investment property is profitable right away. It is quite common for most first-time investors to make no positive cash flow the first several years. If the mortgage is more expensive than the amount of rent you charge, you may find yourself in a negative cash flow situation and have to contribute a portion.
Now this might sound a little daunting, but a negative cash-flowed property can be promising for a number of reasons, including the tax minimising potentials whilst building wealth at the same time.
Being strategic in selecting your property will ensure that you find the right location that will increases in value over time. This will result in capital growth of your asset which then turns into equity and can then lead into more property that will improve your net worth and help to generate eventually a significant income.
The Not so Good…
A survey conducted in 2021 showed the Australian homeowner rate was at 67% with 31% renters.
I’m going to be brutally honest with you… Owning a property is not cheap and some people won’t earn enough to buy any type of property during their lifetime.
What you need is that first deposit. You need extra funds for buying costs. You need to consider that there will be expenses when selling too. Purchasing a property investment isn’t always a walk in the park. You need to be prepared for the long-term commitment.
(But I can say that sometimes, when once bitten, you get the bug and want to do it again when you realise it’s not that scary!)
You have the control. This is your investment property and owning it means that you make all the decisions about what comes next. Renovation? Sure! Hold onto it for retirement? Great! Sell to upgrade for a better property after a few market cycles? Awesome!
The beauty of owning your own property is that the decision is all yours, the power in your hands.
The Not so Good
While property can be less unpredictable compared to shares and other investments, it’s important to remember that owning property helps people to improve their finances… slowly. This is why we always advocate having the 10 year commitment mindset at the get go.
Real estate is not a liquid asset. What do we mean by this? You generally won’t be able to sell it in a hurry if you find yourself in financial hardship. A pro and con here. While this makes property investing a reliable asset to invest in, it also means you can’t just bank it at moments notice.
At the end of the day – all investing comes with inherent risk, but based off the thousands of successful investors out there, it is one of the safest asset classes that an every day Australian like you and me can tap into.