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The Pros And Cons Of Property Investment

property investmentAustralian property market has got enough in its sails to carry you across the path of fortune. In fact, it might just be the best time to move into the market, not overcautious but hungry to an extent. This being said, you will serve yourself well if you know the pros and cons of property investment beforehand.

Pros:

1. Capital growth and rental yield

Property is an asset which has the best chances of appreciating if you are willing to wait and let the trough phases of the property cycles pass. The market is laden with fruits like capital growth and high rental yields.

2. Powerful Indemnities

You can indemnify/insure yourself against any financial implications if you are cautious enough to buy a well-meaning insurance. The best ones are those which are high on endorsements and low on exclusions (Hey! Insurance works the same way everywhere).

3. Not an investor-controlled market

Every theory has an exception. Real estate market proves this saying, being the only investment market not dominated by investors. This behaviour cushions it from being volatile. Also, it is a very generous market which allows you to walk happily to your bank in the long run even if you have made a wrong buying move.

4. You can be in command in worst situations

Quite in contrast to other markets, external forces never completely seize control from you. Even at the worst of times, you always have a semblance of control over your portfolio.

5. Tax benefits

Negatively geared properties (where your mortgage liabilities overrun your rental returns) offer a chance of utilising tax benefits.

Lest you imagine all is rosy, let me also tell you about a few thorns in the way.

Cons:

1. Lack of liquidity

Lack of liquidity can get really frustrating at times. While you can sell your property if such a need arises, it is not a “quick as a wink” process as may be the case with the share market.

2. No end to expenses

The cost you fork out while investing in a property is by no means the final cost. There is an array of expenses which may include, but are certainly not limited to, stamp duty, conveyance fee, landlord’s insurance, maintenance costs, and council rates.

3. Tenant tyranny

Tenants with nefarious motives can make a big fuss while being asked to leave your property. Sometimes the disputes arising on such occasions may leave you poorer both with your purse and peace. In less severe situations you might be victimised by tenants who damage your property or refuse paying monthly rental bills in time.

4. Mortgage issues

In the interim period between two tenancy agreements, you may have to pay a decent amount to keep up with the mortgage commitments.

 

Always keep the bigger picture in mind when you go for any kind of investment property decision. If in any doubt, it usually pays to consult with a professional who is on your side.