Investing directly in property, particularly residential property, has been a popular investment choice with Australian investors for many years and offers investors a number of benefits.
Diversification into an attractive asset class
By diversifying your portfolio with an investment in direct property, you can reduce the overall risk of your portfolio. Returns on property historically have a low correlation to equity-type investments, so if the sharemarket is going through a period volatility, an investment in direct property can help smooth your returns as historically, property has returned attractive yields with relatively low volatility.
A tax effective investment
By investing directly in a negatively-geared property, all expenses associated with managing the property (including interest repayments, repairs and maintenance and advisor fees) are fully tax deductible. You can also claim general wear and tear and associated fixtures.
More control than investing in LPTs
Investing in direct property can provide a number of advantages over investing indirectly in property through a listed property trust (LPT).
As the owner of an investment property, you can continually monitor your investment and add value with simple maintenance and home improvements. You have full control over:
- the type of property you invest in
- occupants
- weekly rental yield, and
- gearing level (or risk) within your portfolio.
When investing in an LPT, these factors are outside your control.
Contact Dixon Advisory about investing directly in residential property.