Why Invest In Real Estate?

Invest in Real Estate

Investing in property has proven itself to be one of the safest investments you can make to secure your future. Past figures have shown that property on average doubles in value every seven to ten years. This is without mentioning all the other benefits that occur when you invest in real estate. As a long term wealth creation strategy, real estate investment provides higher income returns using less money input compared to most other types of investment. With the current housing and rental shortages occurring in Australia combined with the historically low tenant vacancy rates and an ever increasing population, investing in property to benefit your future is a good idea.

Your retirement plan

There are three ways you can look at funding your retirement.

  1. The Government Pension
  2. Your compulsory superannuation contributions
  3. Your Investments

Government Pension

The table below demonstrates what the Government Pension will pay before any deductions in payment are made with the income and assets test.

Status Pension rate per fortnight
Single $824.80
Couple $635.30

Source: Centrelink http://www.humanservices.gov.au/customer/enablers/centrelink/age-pension/payment-rates-for-age-pension

If living comfortably or maintaining your current lifestyle when you retire is your aim, then the government pension is not an option.

Compulsory Superannuation Contributions

According to the latest available Census data (2011) from the Australian Bureau of Statistics:

  • 83.5% people that retire receive the govt age pension
  • 11% receive income from other sources (outside of salary & wages)
  • Approx. 53.5% of people above the age of 65 have no superannuation coverage, and approx. 78% of Australians above 70 years of age are left without any superannuation pension or lump sum payment

This means that only 11% of retired people (approximately 340,000 people) had enough superannuation to live off.

If you want to live in any sort of comfort when you retire creating wealth through property investment is the key. It’s the only way you could dream of retiring on what most people want – 75% of their current income.

Even if you were prepared to live on a pension income this is even becoming more and more unattainable as the pension age continues to creep higher and higher.

Reference: http://www.dss.gov.au/about-the-department/publications-articles/corporate-publications/budget-and-additional-estimates-statements/2014-15-budget/budget-fact-sheet-seniors-and-age-pension

Property Investment

There are several distinct advantages of investing in property or making a real estate investment.

  • Capital Growth – Real estate investments have historically shown a consistent increase in value, generally doubling in value every seven to ten years. Property is a stable investment, resilient to economic fluctuations unlike other forms of investment.
  • Bank Leverage – most banks will lend up to 95% of the value of a property as it is a physical asset. This means that you can use your investment property to borrow for another property and so on to build your portfolio.
  • Rental Income Returns – When your property is being rented, which based on current market tenancy rates would be close to 99% of the time, you are receiving an income from your investment. With Australia’s population increasing, there will be a consistent demand for rental properties.
  • Tax Advantages – Great incentives such as property tax depreciation and negative gearing make investing in property an attractive prospect. With real estate investments, the construction as well as the fittings and fixtures can be depreciated. Negative gearing can create a personal tax deduction for you – where the costs of maintaining and financing a property outweigh the rental income earned.

Start your property portfolio today, and stop dreaming about your retirement.

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