Property investments vs share investments – are you in two minds regarding the best type of investment, whether it be property or shares? All investments would ideally be based on sound research, due diligence and correct investment analysis…
In reality, getting correct advice is a good investment. However there are differences between property and stock market shares which influence people depending on their financial goals and investment needs.
Property investments vs share investments, so do shares actually perform better than property? The fact is shares perform relatively similar to property…for example, a good property investment in a high performing suburb historically doubles every 7 to 10 years and generates a rental yield of 4% – 6%.
The total return from a good property investment can be 13 – 14% per annum. Similarly from 1983 to 2009 stock market shares grew on average 8.4% per annum. Now if you add dividends to the stock, this equals to 13 -14% growth per year.
The fact that the return on investment per year is very similar, there are vast differences in involvement, liquidity and the amount of control you get with each type of investment.
Property…historically has shown to be less volatile and is regarded as a relatively secure investment by the banks, which lend up to 80% of the property cost compared to higher volatility of stocks…banks are prepared to lend only 60% of the market value of shares.
As you already know volatility in the share market is influenced greatly by market sediment, national and global economic factors and media, whereas the property market is influence mostly by local sediment and supply and demand.
Property investments vs share investments…shares are easily liquidated, property can be slow to liquidate. Tax deductions are treated similarly in Australia as both are considered investments.
Property investments make use of tax benefits and depreciation or tax deductible advantages, which are available on new buildings such as capital work deductions and any costs associated with property. These deductions are not directly available to share holders.
Depreciation is ‘on-paper’ loss in value of the building over time. The Australian Tax Office allows you to claim depreciation as a tax deduction, which can save you thousands of dollars every year.
The only problem is depreciation tapers off as the years go by so the newer the property is, the greater depreciation claim will be…
Property investments vs share investments…both investments can be negatively geared, however the biggest difference is investors ability to change and add value to their investment.
Share investments means an investor has little control over the running of the company, whereas in property the owner/investor can add value and improve the investment.
Why is it better to create a balanced port folio of both shares and property? Firstly you need to carefully consider what you want from your investment before you decide where you invest your money.
If you understand the idea of adding value and how to influence your better lifestyle, you want to put yourself in a much stronger position to improve the value of property investments…