At an age when most young people are thinking about their next dinner or big night out, it’s equally important that young people are considering when they will enter the big world of property investing. For those who want to get ahead and achieve results sooner, investing is a wise move. Learn the benefits below.
1. Compounding over time
The greatest advantage for those young investors is time. If you purchase a rental property at the age of 20 and you end up making a loss from the purchase, time is on your hands because you can learn and recover from these mistakes. Since you’re investing at a young age, your personal finances are bound to get tight at times.
CEO of Metropole Property Strategists, Michael Yardney, says that if you’re nearing retirement and you make a poor investment choice it can be more difficult to recover. If you invest in property now, overtime it will most likely increase in value. If you invest at a younger age, you’ll have a longer time period of being able to accumulate wealth and save money to invest in more properties.
“As you get on in life, your personal circumstances change. You may get married and have two incomes, but then you may have kids and drop to one income. If such a situation arises, property investing allows you to let the magic of compounding work in the background,” said Yardney.
2. Financial gains
Investing early on helps develop positive spending habits. The earlier you invest, the less likely you are to have issues with overstepping spending boundaries. The earlier you are to learn the important lessons of investing the more you will benefit. Some of the main financial benefits include:
- Maximise cash flow: increase cash flow or the money left over each month after expenses have been accounted for. This is something that increases over time as rent increases.
- Appreciation: the investment will appreciate in value as the years go by. On the flip-side, it’s important to know that the property can also decrease in value.
- Negative gearing and depreciation: these days, it may be cheaper to own a rental property than a home. The repayments are subsidised by the rent and you end up getting various tax benefits as well.
3. Long term returns
If the value of the property increases over time, the property can deliver long term returns. If you’re looking to receive another source of income, renting your investment property is also on the cards.
Positive gearing can be a long-term goal. Where the property income is greater than property expenses, it could provide the investor with a side income.
4. Great tax benefits
Many of the costs for owning an investment property may be tax deductible. These costs can include advertising for tenants, fees paid on your loan and maintenance. In addition to this, the losses that arise from negative gearing can be used as a tax deduction.
5. Asset creation
The sooner you purchase your first property, the sooner you can begin purchasing more in the future. This means you’ll be able to diversify your portfolio. You can buy several investment properties to increase your wealth and earn more.
As an investor, you have great responsibility to manage the decisions for your own investment property. This includes ways that you can increase its value and also control how quickly you pay down your home loan.
Research and planning can play a big part in the success of your investment. If you’re looking at kicking off your investment property journey, here’s some advice on how you can reap the rewards of property investment.