Property vs Shares

The age-old debate, which one is “The Best”. Am I better off investing in Property or Shares to secure my long-term financial position? The answer is usually dependent upon what camp you are in really – “Team Property” or “Team Shares”. My answer, “…they’re both winners, they’re both strong methods to build wealth…”. The real question should be “How do I invest well in either shares and/or property?”, as both can end poorly if you do not know what you are doing.

  

Property Investment has 4 inherent advantages, compared to shares: 

1. The investor can get to use other people’s money. For every $1 you have saved, the bank will lend you $4, that leverage is what will make you wealthy.

2. The Government will give the investor some of their tax back if they buy an investment property. How much did they claim in tax deductions last year? Not much right, yet one new investment property ($500K) can give them $449,143 of tax deductions in the next 10 years.

3. The tenant will help buy the property for the Investor, over $200,000 of rent in the first 10 years for a four-bedroom house.

4. Once the investor buy’s that first property, they will never need to use their money again. Over time they can build a portfolio of properties using the equity from their first.

 

Shares have advantages

Shares have lower upfront and ongoing costs, they are easier to buy and sell and the investor does not need a lot of cash to start. All these things being said, If the Investor does not know how to invest in property or shares, both can be unforgiving. The Property Investor needs to know things like:

1. Do I buy old or new Property?
2. Where do I buy property to have strong rental yield and capital growth;?
3. What type of configurations are available (house, dual occupancy, house + granny flat);?
4. What is my borrowing capacity;?
5. What is my plan to build a portfolio;?
6. What is tax depreciation?
7. Where do I source a good Property Manager?
8. When should I purchase my next property?

After doing the Property Investment thing for myself and many many clients for over 20 years, I have learnt the answers to these questions, albeit sometimes the hard way. Armed with this knowledge, I founded Macquarie Knight Constructions to share my experiences (and the answers) with all our clients.

Having said all of this … my dad loves shares … go figure.

Matt