Residential investors in Australia own property to the value of $1.56 trillion, according to CoreLogic. Assuming they're making a two per cent net return on their investments – total investor profit is at least $46.8 billion total, or over $23,000 a year each.
As you can see, if you know what you're doing, property is a great place to store and grow your wealth. With those lofty figures in mind, let's take a closer look at the numbers and the specific advantages of Melbourne property investment.
Make a return on the bank's money
Let's say you buy an investment property in Melbourne for $500,000. You use your cash savings to make up a 20 per cent deposit ($100,000) and borrow the rest of the purchase price from a bank.
Your return will be a portion of the $500,000, despite only investing $100,000. This means you're seeing a return off the bank's money – something that's incredibly rare and one of the biggest perks of property investment.
On the other hand, if you were investing in shares or a bank term deposit, you'd only see a return on the $100,000 that you had.
The tax advantages of property investment can make it a very attractive option.
Enjoy a stable return
When investing for the long term and focusing on rental income (not capital gains), property generally provides a reliable return year after year. This is due to the simple fact that people will always need a roof over their heads.
The performance of other high returning investments such as shares, bonds or cryptocurrencies can fluctuate dramatically as the market changes.
If you're new to the game, something unexpected happens, or you make a mistake, this can expose you to a considerable amount of risk.
Make the most of tax advantages
The tax advantages of property investment can make it a very attractive option, particularly if you make the most of them. For one, you can claim any losses made on your investment against your other taxable income – reducing your tax bill and making it easier to hold your property while it increases in value.
You're also entitled to claim a raft of expenses including mortgage interest, legal expenses, agents fees, repairs and maintenance depreciation and more.
While investing in property in Melbourne has its advantages, it's not a get rich quick scheme. You need to do your homework, seek expert advice and understand the market to succeed. To get started, speak to an expert that you can trust at your local Brad Teal office.