Too Young to Invest in Property? Think Again!
For many young homeowners, property investment may seem like the domain of those further along in their lives – people who can afford to because they have reached a point where they have a little bit extra at the end of the month to do with as they please.
Yet this would be a mistake, as with equity building in their properties, homeowners may be more ready to build their wealth through property investment than they think.
Do you realise that you are sitting on a gold mine? Not an actual gold mine – don't go digging in the back yard! – but as you make your regular loan repayments, you are doing two important things.
Firstly, you are paying off the all-important interest, which incurs daily on your loan.
Secondly, you are making inroads on the loan principal and therefore building your equity in your property.
As this equity grows, it can become more and more useful to you. That's because it is possible to leverage it to borrow more money towards renovations, big purchases or – more importantly for our purposes – investing further in property.
Why invest in property? Well, only because it is one of the most popular and proven ways to build your wealth!
Property has a habit of appreciating in value over time. Houses in a certain area may not go up in price every month – every market has fluctuations – but over the long term, an investment in property is generally considered a safe one.
It also needn't be a time-intensive one. You can choose to make capital gains by on-selling a property at a higher price, or investing in a rental property and drawing an income from tenants.
Either way, you get to decide how involved you are in the process, with estate agents and property managers just some of the professionals who can help you along the way.
Tax can be your friend
When investing in property, it is important to understand how you will be taxed as an investor and how to take advantage of certain deductions available to property investors.
This includes negative gearing, when the annual cost of your rental investment is more than the income you derive from it.
The right strategy
There isn't a one-size-fits-all method that can guarantee property investment success. Rather, your situation and personal goals will influence how your strategy needs to take shape.
A mortgage broker can examine your home loan finances and assess whether you are in a good position to invest in property.
Brokers can compare all your refinancing and property investment loan options so that you have a clear view of the paths ahead of you.