Is Investing In Property Even Worth It?

Confession: I would hate to be starting out as a property investor today.

I’m just not sure it’s worth it anymore?

There’s all the uncertainty about the future.

Then there are  costs and considerations that come with compliance alone are almost enough to make you want to throw in the towel before you even begin.

It’s much more expensive than it was when I started out, almost 20 years ago. Property Invest

Nowadays, when buying or renting out a property, there are a number of extra costs and obligations you need to take into consideration.

In most investments, the rent generally covers the mortgage.

This is a broad generalisation, but by and large, the mortgage interest will be your biggest expense, and in the current market – even factoring in COVID-19 related deductions – the rent covers the mortgage.

There are other expenses you’ll need to cover out of your own income, however.

These include landlords insurance, property management fees, council rates, building and contents insurance (contents covers things like carpets and blinds), and ongoing repairs and maintenance.

If the property is an apartment or unit, you’ll pay strata fees, too.

On top of this, you may need to pay for:

  • Safety switch compliance – to ensure the electrical safety switch is current and working. It can cost around $300 to replace the safety switch if faulty.
  • Swimming pool compliance check or certification; one-off fee, around $150
  • Window blinds compliance; this can be bundled with smoke alarm compliance and is something you can do yourself, but if your property is interstate, you’ll need to pay a company an annual fee of around $100 to service it on your behalf. There are strict guidelines on what your obligations are as a landlord when it comes to smoke alarms.
  • In Queensland, you also need to have a compliance check run on your water systems before you’re allowed to charge the tenant for water usage. This costs a small feel, and then if your water systems are not deemed efficient, it can cost hundreds of dollars (or even thousands!) to get them up to speed.

All of the above can amount to a really significant sum.

So is it even worth all the stress and time and effort – especially with all of these new laws that have been introduced post-COVID-19, which dramatically favour tenants?

It can seem like a mug’s game.

Until, I’m reminded why property works.

I recently read about a beautiful Victorian terrace that was listed for sale in Crown Street, right in the heart of Surry Hills in Sydney. Investor

The terrace is on the market for the first time in 45 years. It was last traded in 1978, when it was purchased for the princely sum of $65,000.

It is now listed with a price guide of $3-3.3m.

In the last five decades, it has doubled in value more than five times and it has grown in value by around 5000%.

How else can everyday Australians with little financial knowledge and investing education achieve profits and wealth like this, if not in real estate?

Do you own investment properties or you’re considering investing in the future? 

Educate yourself about where property prices are set to go following the pandemic with in-depth advice from  Michael Yardney, an experienced investor.

Author: Sarah Megginson is editor of Your Investment Property Magazine, where this article was first published – read it here

NOW READ: Recession 2020 and the Australian property markets

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'Is Investing In Property Even Worth It?' have 5 comments

    Avatar

    June 12, 2020 Thai

    And don’t forget that now with the land tax. It’s killing all investors. It’s not worth it.

    Reply

    Avatar

    June 8, 2020 Janis Flynn

    I think you are spot on. My investment propery for $260 p/w gave me $5337 in 2018/19 f.yr. out of $13,500. Rates, insurance, water charges, agebt fees, gas emissions test, smoke alarms test, one off replaced stove $1k replaced a tap that was only 2 yrs old $300. Not worth it. The tenant has 4 dogs rental agreement admitted to 1. It’s all the tenants way. I am now about to sell. Another quandry now. How do you sell with 4 dogs or give the tenant 60 days. If it takes months to sell no income (hasn’t a mortgage) or squatters/damage? Has increased in value though from 1994 until now from $80k to $250k. Has cost a bit over the years but good now to get that lump sum. Don’t know if I’d do it again.

    Reply

      Michael Yardney

      June 8, 2020 Michael Yardney

      Clearly not everybody has done well in property, as I’ve often said property investment is simple, but it’s not easy. However if you follow the rules and buy the right assets many people have become very wealthy through property investment

      Reply

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    June 8, 2020 Ri

    I bought my property at $445k and is now worth only $350k…im in Perth WA and due to mining recession, there is not enough people in WA anymore.. There are still a lot of people looking for rent in my area, however the rent price just keep dropping every year, from 500/wk to 400,350,345,315… My worth investment for me + so many new developments will decrease my house value further. I always thought it will go back up again but it is not, what do you think?

    Reply

      Michael Yardney

      June 8, 2020 Michael Yardney

      Ri, unfortunately not all properties in increase value, and Perth has had a terrible time hasn’t it.

      I don’t know what sort of property you own, but one of the themes you’ll find I have written about for over 20 years is that less than 4% of all properties on the market what I would call investment grade properties.

      Time is it best to cut your losses and buy a better asset.

      Reply


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