Investing in property is one of the simplest strategies to grow your personal wealth. At Mortgage Masters, we’re the mortgage broker Auckland property investors can visit for help finding the ideal mortgage to help them generate long term income and create a better financial future. Below we look at how property compares to other forms of investment for building wealth.
Successfully investing in stocks and shares often requires a lot of research, specialised knowledge and luck. Property by comparison is more intuitive and easier to get a grasp on. With the right professional advice, research and well organised finances, there’s a much smaller risk of making a poor purchase.
Property is an easy asset to understand, without any of the complicated terminologies found in the stock market. Assessing the value of a property is straightforward and creating an investment strategy is simple once you understand basic principles like capital growth and rental yields.
The value of company shares could dramatically shift or disappear in time, while a well-positioned property will continue to grow in value regardless of the market. For example, if you invest $100 000 in shares, you have no guarantees about what the investment will be worth in a few years. The value can’t be estimated by adjusting to the cost of inflation, nor can you predict how social or technological changes might affect a company you invested in.
If that $100 000 was instead used on a deposit to buy two properties valued at $200 000 each with a $50 000 deposit, you’ll have $400,000 worth of properties and $300,000 in mortgages. Rental income can pay off those mortgages within 25 years, even if the properties decrease in value. As a physical asset, property always holds some value.
Rental income offers you a consistent stream of higher personal income compared to dividends. Even if your financing costs and other property-related expenses exceed your rental income, you can use negative gearing to offset costs and reduce the tax you pay. You can also claim deductions on your rental income including rates, insurance, repairs and maintenance.
In New Zealand, capital gains on medium to long term property investments don’t attract tax. While some movements in the housing market can negatively affect the returns you gain, property generally increases in value over time. New Zealand has a rapidly growing population, resulting in increased demand for housing. This will increase property values and offer favourable capital gains returns over time.
Investment properties also function as a working asset for further investments. For example, you can use equity in your existing property as security to borrow for another investment mortgage. The financial leverage you can access is far greater than a share portfolio, making property investment more efficient for growing wealth.
Flexibility and Control
If you buy a share, you buy it at the market price at the time, with no options of negotiation. That price and future value can be affected by unpredictable factors like speculation and world events. Property is more resistant to market fluctuations, as housing is a basic need that can’t be sacrificed during an economic downturn. Even if the housing market crashes, you’ll always have a tangible asset that will hold future value.
Consult the Best Mortgage Broker Auckland Investors Can Trust
With good financial management, expert advice and a home loan with great rates, you can open the door to a range of investment possibilities and benefits. At Mortgage Masters, we’re the best mortgage broker Auckland investors can find for help achieving your investment goals. Contact us for a free consultation