4 reasons why long-term property investment is your best friend!

You’ve probably seen and heard this one a few times before…

Across the board, whether it’s property, finance, or stock, the overarching advice leans toward building equity over longer periods of time. It’s safe to say that as time passes and inflation occurs, money can be made by harnessing growth.

This really speaks to the notion of long-term investment. Now, this is especially true in the property world – but why?

Stick around, because we’ve got 4 MAJOR reasons why long-term property investment is your best friend

1. It’s where the real wealth is made

   It’s no secret – people who have held onto property for a LONG time, are doing pretty well.

   Think of properties in places like Bondi, Mermaid Beach and Toorak. These are the types of places that get passed across generations, building incredible equity over time.

   We’re not saying that you have to purchase and hold property for this kind of timeframe – BUT, it’s the principle that matters.

   These people have purchased high-quality property, in locations with high demand and low supply. That formula just works. As a property investor, keep in the front of your mind the understanding that your goals and success are something for the long-term – as that’s where the equity really comes.

2. Flipping means less profit

   We’re not going to lie, those property flipping shows are pretty entertaining – and sometimes people do quite well!

   Unfortunately, though, it’s not simply pools of money and never-ending profit. Short-term property investment methods like flipping can suck out the profit from underneath you. They also require an exorbitant amount of work.

   What they don’t tell you on the shows is the massive fees that surround buying and selling in the short term. In Australia, we have capital gains tax, which you must pay each and every time you sell something you make money on, shares, products and property. Therefore, more properties sold = more tax paid. So, if you purchase high-quality property that you can hold over a longer timeframe, you won’t have to pay these taxes as frequently!

   Another big profit eater is your agent fees. Agents love taking a commission when you sell your property, so like the capital gains tax, there’s another way your equity, which looks so good on paper, is diminished a little more.

   For the TV property flippers, it’s no wonder they sign TV deals to film their journey – that’s where they really make their money!

3. Minimising Stamp Duty

   Stamp Duty is a tax that is charged atop the purchase price of a property. Because it is an upfront cost, it is separate from a home loan and is generally paid off immediately.

   This means the more frequently you purchase a property, the more you have to pay in stamp duty, minimising your financial return. Ultimately, minimising paying extra fees is a big step toward maximising financial success. Just remember though, minimising Stamp Duty isn’t the be-all and end-all to property investment, as building a portfolio requires multiple purchases and growth.

   BUT, if you’re purchasing property on the short term, buying and selling will require you to pay stamp duty and capital gains tax more frequently. So, focusing upon the long-term will help you to minimise the upfront costs associated with purchasing property, and allow you to continue toward your long-term financial and property goals.

4. Rinse and Repeat

   This one’s all about washing your house – give things a good hose down to ensure things always look as good as new.

   Just kidding, we’re not cleaning experts – and if we were, that probably wouldn’t be our advice.

   The rinse and repeat strategy entails utilising the added equity from your property to help in purchasing more property. This can come from a couple of sources.

   The first and most common is a refinancing plan. This allows you to use the added equity that you have gained over time (an increase in property value) to prove to the bank that you can afford another property. This is great, as it allows you to get your foot in the door of another place, where the cycle can continue.

   The second method is through your rental yield. If you’re able to pay the loan off without tapping into rental yield, this can be used as your deposit for your next property.

   This rinse and repeat method is also known as a snowball effect, as the more equity held, the more swiftly you can continue to process with higher returns. Remember though, that this is a by-product of long-term investments, as the property will continue to appreciate over time.

So, even if the economic uncertainty associated with everything from cost of living to property worries you, long-term investment will always have your back. As we move back towards regular interest rate levels here in Australia, the world will go on, and the economy will continue to grow!

Ultimately, it’s about consolidating the understanding that success is built in the long-term, rather than any short-term trends and emotions. At the end of the day, consistency over the long-term is what breeds success, and following a tailored plan will ensure that you’re maintaining that direction with clarity and confidence.

At Propell, we’re here to ensure that your property journey is one of direction and confidence. Our property plans foster that understanding and utilise to create attainable long-term property goals.

Want to know more? We’d love to help – give us a call on 1300 776 735!