24 Apr 2020

The pros and cons of property investment

Investing in property is one of the many ways you can set up your future. Lots of people like to spout rhetorical and anecdotal advice around the proverbial water cooler, but what is the real story behind property investment? What are the pros and the cons; benefits and liabilities?

Let’s dive in and explore both sides of property investment. 

The pros of property investment 

Property is a stable investment

Property is more stable because it generates fixed returns to the investor. Property tends to appreciate over time, which means that it’s a reliable nest egg to have for when you’re ready to retire. 

You generate rental income

Having a consistent rental income is a great way to make passive income. You have an advantage if your rental income is greater than the mortgage repayments on the house, because then your mortgage is being taken care of, and you also make a profit. 

There are tax offset benefits

Tax offsets allow you to claim back expenses and fees on your house. There are certain rules to keep in mind, but it’s a great initiative to safeguard investors from losing money on a home. You can also see how you can get more back on your property with capital works deductions.

You have a tangible investment asset

Having an investment in property gives you an added layer of confidence because you can see, inspect and use the property. Unlike, stocks and bonds, property is tangible, which makes it easier to check on, fix up and improve. 

You generate equity to help purchase future properties

When you have a property with renters paying off the mortgage, and the house has also appreciated over time, you’ll have generated significant equity. Equity is the difference between the market value of your first property and the amount you still owe on your home loan.

The cons of property investment

Your rent may not cover expenses

When your rental income isn’t enough to cover the mortgage on the house, you have to supplement the rental income with another source. This is known as negative gearing. This puts a strain on your take-home income, but it also reduces your taxable income. It’s typical for investors to negatively gear their investment property when they’re planning to sell in a short window. 

It can be difficult getting good tenants

Depending on the location, local facilities and infrastructure; it can be tough to get good tenants, not to mention good tenants who stick around. This is a constant challenge for most investors. That’s why it’s important to do your research, speak with an expert Lending Specialist and minimise speculation. 

Get more insights with a lending specialist

At Mortgage House, we’re no strangers to the investment journey. 

If you’re thinking of investing in property, you can contact us for advice about the best options for you when it comes to your mortgage. The cost of your mortgage can drastically affect your financial planning, so it pays to speak to the experts about it.

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