Written by Sally Norton for Vogue Real Estate Australia
Long-term, rental properties proved to be one of the most reliable of all investment options. It has been proven over the years that, no matter the economic situation, brick-and-mortar provides security. This resilience is partly why the number of landlords in the world is unlikely to diminish. Security is not only visible in the tangibility of the investment but also the financial gains it provides. Aside from being a robust investment class, relatively immune to recessions, and other crises, what other reasons make rental properties a great investment?
1. Getting started is not too difficult The majority of Australian landlords started small, without a clear intention of becoming property investors. The first step was always to buy your first condo. Later on, when the property started to appreciate, savvy homeowners discovered the benefit of owning a property that can repay itself over the years. This is the moment when they decided to save for an investment property. After all, it is easy to recognize the advantage of (mostly) passive income.
Furthermore, investing in rental properties does not require education or expert knowledge. While a search for the right market and the right kind of property takes time, it is inexpensive or free, and you can easily do it online. To get a more solid return on investment, look for a good neighbourhood for your rental property, and do not hesitate to explore it on foot.
2. Getting financing isn’t difficult either
From the lenders’ point of view, home loans are the safest option, which is why they lend up to 95% of the property value at lower interest rates. This is something potential investors should exploit. Access to greater leverage is complemented by the fact that landlords get their rental property subsidized by tenants via rental payments.
3. Investment in rental properties fits every budget
While it may seem at first glance that property in Australia is too expensive, one should look again. True enough, cities like Melbourne and Sydney demand higher investments. However, property prices and rents in big hubs tend to drop the least, recover faster, and appreciate more than elsewhere in the country.
Still, the 24-hour cities are not the only locations that renters favour. Following the workforce, you will locate the best destination(s) for your rental properties, and they point to the more affordable, developing areas. Moreover, the property market allows negotiations, unlike other markets. You can obtain a very good price to value ratio by combining your negotiating skills and a search for undervalued properties.
4. Property investment in Australia benefits from a favourable taxation environment
If you wish to leave Australia and start over abroad, you can always sell your rental property. If you’ve held it for more than a year, you will pay the capital gains tax only on half of the profit. More details on different tax deductions available at the moment can be found on the ATO (Australian Taxation Office) website.
5. It is a stable long-term investment
Living partly off rental income is a long-term plan for many property investors. The low volatility of the property market allows these plans to come to fruition. A property in the right location supported by regular demand is more likely to endure both brief and longer-lasting crises. Even if the crash happens, the property and the land it stands upon will still maintain a certain value. Following that scenario, you can sell the property, move furniture to a storage unit that is spotless, weather the crisis, and then start anew.
6. Australia’s economy is generally solid, and the government is likely to support property owners and landlords Following this year’s recession, Australia is on the road to recovering, albeit rather slowly. The government already has a plan to boost growth, jobs, and consumer and business confidence. Fiscal support is also in the plan, including tax incentives, targeting the private investment sector, among other things. Moreover, (any) government is highly unlikely to aggravate homeowners and property investors as they, essentially, make the majority of voters.
(Sub)urban development works in landlords’ favour, too. Government and company investments in roads, airports, amenities, and other projects that improve the quality of life provide employment opportunities and, thus, raise the demand for housing. Even though you don’t participate in these investments they still raise the value of your property and its rent.
7. You have full control over your investment
If you don’t wish or can’t afford to invest your time and effort into the search for the ideal rental property but still want to benefit from it, you can always outsource the tasks. True, hiring a professional will cost you. However, at the same time, the return on investment is more likely to be higher and quicker.
On the other hand, if you want full control over your investment and don’t mind a hands-on approach, you’re free to try. Being an active landlord means balancing expenditures (maintenance, mortgage payments) and revenue (rent). Hence, rental properties allow you to decide whether you’ll team up with a real estate agent or a property manager or run your property all by yourself.
8. A rental property is something you can pass on to your children Rental properties are a good investment for one more reason: they are unlikely to lose value with adequate maintenance – on the contrary. You can pass the ownership to your children at any time. Rental properties are a valuable asset as long as they are in strategic locations. The demand for housing is not the same everywhere in Australia so only a well-positioned property will yield a reliable financial gain to you and your successors.