Property & Real Estate Investment

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Capital Gains and Rental Income

Some people say they like to invest in property because they love architecture, others because they love a particular area but whatever your reason to be a property investor the main reason is because over the medium to long term it increases in value and you receive rental income.

Another common reason that people love investing in real estate is because you don’t need to put much money down as a deposit, yet your gains become pure equity!

Property Cycles and Buyers and Sellers Markets

Just like the stock market and buying shares in individual companies supply and demand change and prices go up and down in the short term. Bad news about property investment might affect prices on month and boosts to economy can increase property demand and for this reason it is possible to be aware of the different stages of the property investment cycle.

Mining Booms & Downturns

When the global economy was booming on the back of massive growth from global manufacturing in China their demand for iron ore and other minerals and coal saw an up-ramp in mining investment in Australia.

This investment in machinery, gas production plants and mineral processing were one-offs and required massive initial capital investment and human resources which was never going to last for ever.

These towns have a future but this massive increase and decrease is based on major projects and doesn’t necessarily reflect ongoing employment.

Regional Property Investment

Regional towns like Bendigo, Ballarat, Geelong, Wollongong and Newcastle etc are primarily driven by increases in the major cities close to them which pushes people, primarily families but also retirees further out where the lifestyle is more idyllic.

Property Ownership Structures

Single, Couple or SMSF

The most desirable ownership structure at the moment is for one person, couple or their self-managed super fund to own a property by itself with only a lender involved if money is being borrowed for the purchase.

This simple structure is liked by the banks who prefer to have fewer humans involved in the ownership because that is their biggest risk.

Tenants in Common, Joint Tenants

These are the two most common methods for individuals to own a share of an investment property and the major differences between the two is who owns the property if one of the owners dies:

  • Tenants in Common – the share of the person who dies goes to that persons estate
  • Joint Tenants – the share of the person who dies goes to the other owners

Property Unit Trust

This structure enables individual to own units, just like you can buy shares in a company, and each of those units are equal in value. The rental income from properties owned by a Unit Trust is distributed to the unit holders as income and any profit made when a property is sold is distributed back to unit holders.

Company Structure

Property can be owned by a company, which in turn is owned by shareholders. The issue that lenders have with company ownership relates to the viability of the company and how much money it can contribute to the purchase. The other important consideration about the company structure is that shares can be issued to grow the company and different people can own a different percentage of the business – they can also sell their shares, which makes it flexible.

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