Why should I invest in property? Is it worth all of the effort?
These are common questions that would be investors ask before they start investing in property. I want to settle it once and for all. I want to answer the question “Why should I invest in property?”
Firstly let’s break some common myths about property
You need a lot of money to invest in property – You can buy your first property with as little as a 5% deposit. You may not be able to purchase your dream property, but you can get into the market for as little as $5,000 for a $100,000 rural property or $15,000 for a $300,000 property.
It costs you money to own property – You can purchase property that generates more in rent than you pay in expenses. These properties are called positive cash flow properties.
I don’t want to have to fix toilets – Hire a real estate agent to manage your property for you and you will never have to worry about this.
Property is expensive to upkeep – Some properties can be expensive and yes properties have expenses. But in many properties the rent will pay for this.
Shares are better investments – Shares are different investments, not better investments. They are more volatile and you can lose your money a lot easier in shares.
So why should I buy an investment property?
Here are 5 reasons you should seriously consider investing in property:
Almost guaranteed price increases
Investment books debate over the growth rates of property. Some books say they double every 7 years, some say every 10 years and a few say every 15 years. But they never debate over the fact that property goes up in value. It is a just a matter of how quickly the value increases.
Property relies on a non renewable product – land – and they aren’t making any more land!!! The population of the world is almost 7 billion and this is expected to grow to almost 9 billion by 2050. This puts more demand on land and thus prices increase. I haven’t even mentioned inflation yet…which naturally increases the price of everything.
It’s hard to find a property where the price will be cheaper in 10 years than it is today. You might be able to find these properties in Chenoble….
Almost guaranteed cash flow increases
In Australia our population is growing faster than our housing supply is growing and even if the economy crashes people will still need a place to live. This means that in almost all areas rents increase each year, sometime as much as 10% per year in increases!!!
If you are a property owner this means each year your income goes up, which your major expenses (your mortgage) stays relatively the same or goes down!
The banks give you the money to buy a huge investment
The banks are happy to buy the property for you. You just have to put in a measly 5-20%. The banks are giving you money so you can buy an investment property for yourself! And they don’t even expect a share in the profits.
Very few investments allow you this sort of low interest loan that allows you to buy such a valuable investment.
Your renters pay you to own a huge investment
The bank gives you the money to buy the property, and then the renters pay the bank off for you. It is a pretty sweet deal if you ask me. Someone else buys the investment for you, and then someone else pays off the loan.
Buying positive geared property means you even get EXTRA money into your pocket each week. So you get paid for someone else to buy a huge investment for you. When you look at it like that it is a no brainer.
If you are currently negatively geared then increase your rent, over time this will happen naturally anyway. In no time you will have more than enough rent to pay your expenses.
Overall a stable investment strategy
Why do the banks offer up to 95% loans on property? Because it is a stable investment. It is really hard to lose money.
This is a clear sign that property, when done well can be extremely low risk.
So the question shouldn’t be “Why should I invest in property?” Instead you should be asking questions like “Why shouldn’t I invest in property?” and “How can I start investing in property?”