Investing in residential property
For the majority of investors, residential property such as apartments, townhouses and houses is a favoured option as residential property is generally more affordable than commercial or industrial property investment.
Investing in residential property can offer investors a number of benefits.
Diversification into an attractive asset class
Whilst many investors hold investments in traditional asset classes such as bonds and shares, by incorporating residential property into your portfolio, you could reduce your overall risk. Returns on property historically have a low correlation to equity-type investments.
And historically, property has returned attractive yields with relatively low volatility.
A tax effective investment
All expenses associated with managing your investment property (including interest repayments, repairs and maintenance, and adviser fees) are fully tax deductible. You can also claim general wear and tear and fixtures. There are also tax advantages for negatively-geared properties.
Utilise appropriate levels of gearing
Most lenders generally lend up to 90 per cent of a property’s value, allowing you to purchase a larger asset with minimal initial outlay. Of course, the appropriate level of gearing will depend on your individual circumstances, and should be determined in consultation with your Financial Adviser.
Investing in residential property through your SMSF
Purchasing residential property within your self managed super fund (SMSF) can be an effective way to increase the value of your retirement savings and provide tax effective investment returns. Depending on your individual circumstances holding property outside super may have greater tax benefits.