Retirement Planning Dreams

Over the years, wealth creation experts have shared their secrets for building wealth with property investments. Despite the economic challenges plaguing the global economy, reports indicate that property investments continue to produce more millionaires in Australia.

Property investment is a good source of ongoing income and high capital growth. It can be both a short-term and long-term strategy for building wealth. With property, an investor can earn rental income for immediate cash flow while its value appreciates over time.

Leverage: Real estate is highly regarded as a secure asset in financing. An investor only needs to raise the 20% deposit while the lender finances up to 80% of the property’s value. This allows an investor to spread his funds across several investments at the same time.

Capital growth: Property is considered a good investment if the rate of its capital growth exceeds the inflation rate. Provided that investment property is carefully selected, the value of property ordinarily appreciates and can yield higher returns when the investor sells it.

Equity: Equity is the value of property that is not subjected to a mortgage. The value of equity can increase in time as the property experiences capital growth. The increased net value can be used as deposit for another investment purchase. When executed correctly, this investment strategy can have a snowball effect and is the key to creating wealth.

Supply and demand: Unlike commodities and other kinds of investments, land has a finite supply which cannot be produced. The demand for properties also continues to rise as population progressively increases. Everyone will always need a roof over their head which is why property values are highest in very populated areas. The combination of high demand and decreasing supply of property can also drive up purchase and rental prices.

Tax implications: The expenses relating to property investments are usually tax deductible. Examples of tax deductions are interest costs, management fees, costs of repair, and legal fees. The ATO allows investors to use these expenses for minimizing their tax liabilities. An investor can also use negative gearing to reduce its tax liabilities. Negative gearing is a situation when the cost of borrowing money used to invest in property is higher than the property’s rental income. The difference may be deducted from the investor’s other income taxes.

Investing in your first property or home can leave you feeling overwhelmed. But it gets better in time as you learn how to choose the right properties to buy, the best home loans to finance other investment properties and the right time to buy and unload investments. A mortgage broker can ease the initial worries by helping you design your investment strategy and guiding you through investments for building wealth with property.

For anyone wanting to build wealth via real estate as a vehicle, please visit Lendingplus.

Filed under: Investments on October 30th, 2011