Is property investment right for you?

What to consider before buying an investment property.

Buying property is a common long-term investment strategy for many Australians, but there’s a lot to consider before making a purchase.

Know the benefits

Property is often people’s first choice for investment, as it’s considered less risky than shares or other investments.   

Benefits of property investment include:

  • Unlike intangible investments like shares, property is an investment you can see and touch.
  • If your property increases in value, you could make a profit when you sell.
  • If your property is tenanted, you can earn rental income to offset your mortgage and other costs. 
  • You can claim a tax deduction for property-related expenses for the period your property is rented, including interest on loans, management and maintenance costs.

Understand the risks

Like any investment, property has its own risks that you’ll need to take into account. Risks can include:

  • The rent earned from tenants may not cover your loan repayments and expenses.
  • If the value of your property goes down, you may end up owing more than it’s worth.
  • An interest rate rise will mean higher repayments and less disposable income.
  • If your property is vacant, you’ll have to cover the costs yourself.
  • It can take time to sell your property, so you won’t be able to access funds quickly.

Costs of property investment

Buying, managing and selling an investment property can be costly. 

Buying costs

Costs involved with purchasing a property include stamp duty, conveyancing fees, search fees, building and pest reports and legal fees.

Owner costs

Once you’ve purchased an investment property there are a number of costs you’re responsible for in addition to mortgage repayments. Ongoing costs including rates, water bill, insurance, body corporate fees, land tax, repairs and maintenance costs and property management fees.

If your property is positively geared, you may have to pay tax on your rental income.

Selling costs

When you sell your investment property, you’ll have to pay real estate agent fees, advertising costs and legal fees. You may have to pay capital gains tax if the property has increased in value.

The information in this article has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in the document is general advice and does not take into account any person’s particular investment objectives, financial situation or needs. Before acting on anything based on this advice you should consider its appropriateness to you, having regard to your objectives, financial situations and needs. You should obtain and consider the Product Disclosure Statement or terms and conditions relating to the products mentioned, before deciding whether to acquire any products.