Sit around a dinner party table or barbecue in Australia and the subject of property will almost certainly come up. This often leads to the question – one that is even more relevant post-GFC – “What’s the better option – investing in shares or real estate?”
The pluses for shares – they are very easy to buy and sell. They can be readily sold either online or through a stockbroker. You can buy small parcels of shares, and diversify rather than putting ‘all your eggs in one basket’. Many of the costs associated with share trading are tax deductible (as you pay tax on your gains).
However, you only need to cast your mind back a few years to understand that the share market can be volatile. Stock market crashes do occur and can be devastating as you watch your nest egg disappearing in a matter of hours or days…investing in the share market is not for the feint hearted. Neither is it for the impatient, you must look at long term results. Time is also an issue – you need to be on the ball constantly, especially if you’ve invested in high risk stocks.
Property has proved to be a relatively secure investment over the past 20 years. It’s considered low-risk and less volatile than shares.
There are many benefits involved in investing in real estate. The low risk factor is the obvious one, however there are a number of tax deductions that can be claimed including interest paid on the loan, repairs and maintenance, rates and taxes, insurance, agent’s fees and much more. Tax deductions can also be claimed as a result of negative gearing.
Many people like the fact that real estate can potentially fund them in their retirement. Rental housing rarely decreases in price, making it a good long-term investment option.
Property also provides an asset base, which will allow you to take out another loan or invest in something else. It’s also useful as security when taking out loan on another home, car or a personal item.
Diversifying in different properties and/or different classes of properties such as commercial and residential real estate will ensure you receive a better return while minimizing your risk. In addition, keeping your property in a good state of repair will keep ongoing maintenance costs down and limit vacancies.
As with any other investment decision, nothing can beat a well informed choice. Give us a call and we can take you through your options.