It seems like inflation has caught many people by surprise. As petrol prices doubled, vegetables and grocery items became dearer, Australian consumers were left scratching their heads wondering, ‘how did that happen’?
However, given all the financial stimulus packages unleashed by almost all governments across the globe during the past two years of the pandemic and lockdowns, many market observers have warned of an impending inflation.
At some stage, this has to happen because there’s too much money floating around. And with interest rates also at low levels, economist and market analysts believe it’s only a matter of time for inflation to rear its head again.
Geopolitical tensions in several parts of the world are also adding to the inflationary pressure as the supply and demand equation becomes skewed.
The question in many people’s mind is how to protect their wealth and hard-earned income from inflation?
As prices (of almost everything) continue to rise, consumers are expected to shell out more and allocate more cash to their day-to-day living.
At times like this, it’s good to consider and evaluate which asset will help protect you from inflation.
Over the years, it’s been proven that investment properties have provided a solid protection from inflation. In most cases, investment properties including apartment units and townhouses have also increased in value.
At the same time, the ongoing rental income from investment properties have provided a buffer for property investors to weather the impact of inflation.
So, while many people are still searching for ways to create passive income, a time-tested way of doing it —by investing in property — may be flying under the radar.
Passive income allows us to live the life we desire. Tiffy Rubinat, General Manager at Wealthi.
Buying a unit, a townhouse or even a house with the view of renting it out to generate ongoing passive income, has been delivering great returns to many property investors.
One of the key benefits of investing in property is the ongoing income from rent.
In most cases, the income from rental properties can cover a big percentage of the mortgage repayment (if you took a mortgage to buy the property). Usually, this means the rental income could pay for the property itself within a few years.
Given the lack of rental accommodation in many Australian cities, chances are a rental property investment will be tenanted continuously and for the long-term as tenants sign up for long lease periods.
As long as you invest in properties in highly sought areas – near city centres, with access to amenities, transport and infrastructure, employment and jobs or near universities and schools, you will have an ongoing passive income.
Increasing demand for rental properties set to continue
With the return of overseas migrants, visitors and tourists to Australia, we’re seeing an increasing demand for rental accommodation in most major cities and regional areas. And we expect this trend to continue for the long-term.
Another major benefit of an investment property is the taxable component that you can claim against it.
For example, if you buy a house and renovate it, you can’t claim any tax deduction on those renovation expenses. But if you buy an investment property and you renovate it for the usual maintenance and upkeep, you can claim some taxable expenses.
Many people may not be aware of the taxable claims on a property investment including repairs and maintenance, depreciation costs, management fees and other related expenses.
A passive income generator that keeps on giving
The ultimate benefit of investing in property is the fact that you can use it to build a portfolio of properties that has the potential not only to deliver passive income but could generate more wealth creation in the long term.
We have seen many clients who started with one investment property and were buying their second or third properties in no time at all.
This is because once you have enough equity in the first one, you can use that fund to buy a second one and so on.
So, while many people may still be looking for ways to generate passive income, investing in property may be worth looking into. It’s a proven way to generate ongoing rental income. Plus it can set you up for a long-lasting and solid foundation of wealth creation.
If you would like to discuss the Australian property market in more detail, please reach out to the Wealthi team. We’re happy to have a chat and show you how we can help you build a successful property portfolio.