Invest in property in Australia

Real property and especially of Australia is an excellent investment. Not only is it much more difficult to lose money in property market values, but also property that benefits both steady capital growth and rental income. And as rental income increases over time to protect you from inflation. At the same time, you can borrow money to buy the property and the environment despite the high taxes in Australia, property investment can be very efficient tax.

Let's take a look at these advantages, and some of the most beneficial aspects of residential real estate investing a bit more detail.

1. An investment market not dominated by investors

First, it is necessary to note that some seventy percent of all residential properties are "owner occupied" and only thirty percent is owned by investors. This means that residential property investment market is not only in fact dominated by investors, which means there is a natural barrier on the market that is not available in the stock market. In short, if the ownership of securities of an accident by 10%, 20% or even 40% all still have a house to live in and for the majority of owner occupiers simply overcome any significant fall in place to sell and rent (compare this with the stock market, where a significant drop in prices can trigger a serious crisis). Of course, property values ​​and can bring down, but just do not show the same level of volatility in the stock market and the property offers a much higher level of security.

And if you do not believe me when I say that residential property is a safe investment, then ask the banks. Banks have always been residential real estate as an excellent safety and that is why "pay up to 90% of the value of your property, they know that property values ​​have not fallen in the long term.

2. Sustained growth

Property prices in Australia tend to move in cycles and historically have done well, doubling in cycles of about 7 to 12 years (equivalent to around 6% to 10% annual growth). We all know that history is no guarantee for the future, but combined with common sense is all we have. There is no reason to believe that the property trends of the last 100 years would not continue in the coming decades, but to succeed in real estate investment must be prepared and able to withstand any storm intermediate in the market, but are applies to any investment vehicle you choose.

Average price of housing in Australia between 1986 and 2006, published by the Real Estate Institute of Australia (REIA) shows that back in June 1986 would have bought an average home of $ 80.800. That same house would have been worth $ 160,500 in 1986, which is almost double what it paid 10 years ago. Another 10 years later in 2006 that the average home valued at about $ 396,400. Thus, between 1986 and 2006, average home rose nearly 400% or 8.3% annually.

Not bad. And very much in line with the long-term history.

In fact, as Michael Keating said in his blog on January 24, 2008 (Why Melbourne's properties will keep rising), is actually lower compared to the historical average. Australia Property prices have been tracked by something like the last 120 years and on average have increased by 10.4% per year. If you believe that I had to do with Australia being a newly discovered colony, and do not think this is sustainable in the long term, consider this. In the records of property sales in the UK back to 1088 and data analysis shows that in the 920 years of ownership in the UK, has increased on average by 10. 2% per year.

3. Buying with other people's money (OPM)

Now just in case this has not been enough to convince of the value of residential real estate investing, let me tell you one of the great secrets of wealth creation, which also applies to investment in property. The secret is in the OPM. Other peoples money.

Secret? No - it's just marketing hype you see on the web, but the power of money from others, or more commonly known as leverage or indebtedness is absolutely fundamental to wealth creation. And in the case of ownership of the influence that can be applied is substantial. As mentioned earlier, banks in residential property as security and love so easily give 80% or 90% of value.

It was Archimedes who said, "Give me a lever and move the earth." Well, as an investor does not want to move the earth, you want to buy as much as we can! By using the advantage of substantially increasing their ability to profit from their investments in property and, above all, allowing you to purchase a much larger investment than would normally be able to.

Let's take a look at how this works. Imagine there are five investors, each with $ 50,000 to invest. They say that everyone buys an investment that achieves 10% growth per year and has a rental yield (or return) of 5%. An investor borrows 90% of the value of your investment property (loan to value ratio or LVR of 90%) and Investor B, C and D provided 80%, 50% and 20% respectively. E investor does not borrow at all and goes for a cash transaction.

Let's start with cash flow, which is here simplified rental income minus interest paid. An investor, who directs 90%, has a negative cash flow of $ 15. 500 for the year, while E investors borrowed any money at all has a positive cash flow of $ 2,500. But that's not the whole picture, because each of the properties of an increase in capital value and once included the picture changes significantly, Investor A has a net worth increase of $ 34,500 E investors; up not increased its equity by only $ 7,500. In terms of ROI An investor achieves a yield of 69% on your first E $ 50,000 from investors, while he got a yield of 15%.

That's pretty impressive for a year. And if investors grow their properties or two complete cycles we're talking about wealth creation seriously. And once investors have enough equity in your investment property can be used to finance that purchase a second growth after a few years will allow the purchase of a third party and we are on our way to wealth! That is, those that guide investors and investors did not go anywhere fast.

However, it is not so easy. As investors have seen, made by a negative cash flow in its first year and will continue for several years until rental income has grown enough to pay their interest. He has to finance this deficit your annual salary. And this is called negative gearing - you borrow money to generate capital growth on your property, but incur an annual deficit in the short term. For most investors, this means that there will be a limit to how many properties they can buy with negative leverage, and no income too free. If you look at the sections of our strategy can read more about negative gearing and techniques to avoid paying the deficit of its own pocket. Also the direction of positive cash flow properties.

But back on the subject and take a look at some of the most compelling reasons to invest in residential properties in Australia.

4. Revenue grows

We talked about Australian residential property investment is safe, long-term growth prospects combined with the appropriate level of leverage can create significant wealth. He also referred briefly to the fact that it generates a rental income. The good news is that in recent years, the income received from rental real estate investments has increased and this increase has exceeded inflation. In fact recent years have shown dramatic increases in rents - the rent I know because my investment properties has been booming. But it really is.

Ok, but it is likely that rents will continue to grow? Thus, the statistics show that the level of home ownership in Australia is slowly decreasing. There are a number of reasons for this, but as demographic trends, particularly as property prices continue to rise, fewer people are able to afford your dream house. The latest figures from the Australian Bureau of Statistics confirm that more and more Australians rent and many industry commentators suggest that the percentage of Australians who are tenants in the near future will go up by 40%. So the demand is growing. We also know that the supply of rental properties of good quality is limited (very low unemployment rates in all of Australia) and the government is having difficulty providing public housing. So overall, it is likely that rents will continue to grow at a faster rate than inflation - good news if you intend to become a real estate investor!

5. Efficient tax

When it comes to investing in property, your best friend is the bank, as they provide the leverage you need to accelerate your wealth creation. His best friend is a second tenant, because without a tenant investment property is empty and his best friend third is the tax collector.

The tax collector? Of course. How can it be that Australia is not known attractive tax rates, in fact the opposite?

Well, first of all the interest you pay on the loan to buy an investment property is fully tax deductible and if you own property in more than a year you only pay capital gains tax of more than 50% of the profit. Add to depreciate certain benefits and that has the makings of a very efficient investment taxes. If you do your homework, the bank will be happy to give 80% or 90% of the money needed to buy your investment property and once you own, your tenant and the tax collector pay interest and expenses rent. Guess who gets capital gains, you! Talk about the OPM.

6. Millions of millionaires

And if that is not going, consider this: most of the world's richest people got rich investing in property. Those who did not get rich from the property usually invest their new wealth on the property.

Therefore, if the majority of wealthy people have used the investment property to increase their wealth, why not use that knowledge to take advantage and do the same! There is nothing wrong with seeing what successful people do and the application of these principles to your own life.

Even McDonalds make more money through their real estate through the sale of hamburgers and fries, as it has most of the land and buildings which are franchises!

7. You can do it too

Before you say, good for the rich, but how the hell will go into the investment property, let me say this. No need to be very rich to get into investment properties, but it really does not have large sums of money to participate. That's because many banks lend 80%, 90%, 95% and sometimes even 100% or more of the value of residential property. As long as you have a steady job and a little initial capital (spare capital in your home), you can afford to buy investment properties.

It has been proven time and again that careful and intelligent use of real estate can enable ordinary people like you and me to become property millionaires within 10 years. If you really intend to become one of the rich in the future, should take a serious look at the use of property in their favor.

8. Too much work?

There are many ways to make money and some say that real estate investing is not easy and requires much time and effort. It takes time to get an understanding of the housing market and how to invest in property. It can take weeks or even months to research and find areas of investment property for you. And then it just gets worse, you have to arrange finance, get a lawyer to deal with all the legal work. Only the finance and legal work can take 30 to 60 days. And once you own the property the work is not done, because you need to take care of it and do your tax return.