Tell me, Daniel: Why do people invest in property?

Whether you're already committed to residential property investment or you're just toying with the idea now, it's worth wrapping your head around what the whole process entails.

After all, building a real estate portfolio doesn't happen overnight. It requires sound property investment advice, careful planning and an ongoing commitment to keeping your dwellings well-maintained. However, it's also a great investment option – want to know why?

There are numerous reasons why people invest in property. Here are just some of them.

A long term plan

Individuals often make their way up the real estate ladder because they're focussed on long-term wealth creation. 

Imagine the potential if you started building up your portfolio in your 20s or 30s – by the time you reach retirement age, your properties could have experienced strong capital growth. In that time, you'll need to keep with loan repayments, but a favourable rental income should help you manage your obligations.

Financial leverage

As you pay off an investment loan, your equity in a rental will rise. Once you've built up sufficient equity, you can tap into this to invest in more properties and build your portfolio.

It's this kind of financial leverage that attracts many people to the idea of property investment.

You can use the existing equity in your property – or properties – in lieu of a deposit on your next dwelling purchase.

Tax benefits

Did you know that you might not have to pay tax when you sell your property?

If you develop a regular pattern of buying and selling property, and specific intentions relating to these purchases, you may be classed as an investor, speculator or dealer, explains the Inland Revenue Department. Accordingly, you may have to pay tax when you sell up.

However, some owners of rental properties don't have to pay tax. Chat with a financial or tax adviser about what your tax obligations could be.

Here's to your financial independence!

Daniel Carney
Authorised Financial Adviser / Investment Property Expert