Earning fast money is everyone’s dream. But as a real estate investor, if you own a quality, well-located residential property, it pays to be patient and ignore the talk around the barbecue about the latest sensationalist real estate market commentary.

 While housing values move through cycles, the long-term trend is irrefutably upward. According to CoreLogic, dwelling values have increased nationally by 382% over the past 30 years[i], or in annual compounding terms, rising by 5.4% on average since July 1992. This growth level makes a well-located property one of the best ways to increase your wealth long-term. Over the last ten years, the results are even better, with the Federal Government’s Money Smart website reporting that Australian property has produced average returns of 6.3% per year.

Sure, an investment in shares can generate similar levels of long-term growth. However, unlike equities, residential property is nowhere near as volatile. With shares, for example, one piece of bad news, your entire investment might go up in smoke. 

Bonds are generally viewed as a lower-risk asset class if you want more defensive, income-producing investments. However, low risk also generally means low returns. Bonds don’t produce capital growth, while returns are usually between 3-4% longer-term. Meanwhile, cash is the last of the four major asset classes. Another defensive, income producing investment asset, cash includes bank accounts, high-interest savings accounts, and term deposits. Used to protect wealth rather than grow it like real estate, the average return from cash accounts over the last ten years is 3% per year[ii] - and much lower over the last 24 months or so.

 While real estate is king, there’s more to owning a residential property investment than capital growth. A rental property also produces income returns from weekly rents. Better still any expenses from holding an investment property can be claimed as tax deductions and could potentially shave many thousands of dollars from your annual tax bill. These expenses include property management and maintenance expenses, rates, strata management costs, landlord insurance, interest on the investment loan, and repairs and maintenance and more.

 Between outstanding long-term capital growth, generous income returns, and the tax benefits, you’d be hard pressed to find a better investment than a quality, well-located property.

To find out more about the benefits of owning a quality, well-located residential property, talk to your accountant and local Raine & Horne Property Manager today.

[i] https://www.corelogic.com.au/news-research/news/2022/the-long-game-30-years-of-housing-values

[ii] https://moneysmart.gov.au/how-to-invest/choose-your-investments