New ways to invest in property continually emerge. Nowadays, you can even invest in property with as little as $50.
In this article, we will cover the following ways to invest in property:
- Fractional investing
- Real Estate Investment Trusts
- Purchasing and renting a property out
- Turning your home into an investment
How to invest in property
To invest in property you need a strategy, the finances and the knowledge of what you want to invest in – especially now that there are so many different property investment options available.
Fractional investing is a relatively new way to invest in property that allows you to invest with as little as $50.
Fractional investing involves purchasing a fractional ‘share’ of a physical property through a trading platform like BrickX or Bricklet. This share, also known as a ‘bricklet’, can be purchased for as little as $50.
Example: A $500,000 property is broken into 25 bricklets, valued at $20,000 each. Each bricklet entitles the owner to 1/25th ownership of the property.
Bricklets work in the same way as other tradable shares, in that they can be bought and sold on a trading platform. The way you earn a return or dividend is through the net rental income from the fraction of the property you own. Further returns can also be generated if the property’s value increases through capital growth when it comes to selling your share in it.
Another method of fractional investing is through The DomaCom Fund. This is a regulated and ASX listed company which is a managed investment fund. It allows investors to select the properties they are wanting exposure to and via crowdfunding, the investors commit towards the eventual purchase of the property.
When the crowdfunding campaign is complete, The DomaCom Fund purchases the property, places it in a sub-fund and issues the investors involved with ‘units’ in the property that are proportioned to the amount they invested. Each investors return is based on the percentage of the unit they own. The units are liquid, so investors involved can sell their units to other investors.
Real Estate Investment Trusts (REITs)
Investing in a REIT is another way to get exposure to the property market without buying a physical property. A REIT is like a managed fund, in that it is professionally managed and pools investors’ money together to invest in a diverse portfolio, often made up of commercial properties such as office towers, shopping centres and healthcare facilities.
When you invest in a REIT you are issued securities, which act like shares. The securities are publicly traded on the Australian Stock Exchange and pay a regular income in the form of a distribution. Like shares, they also have the opportunity for capital gains and can be sold anytime. The minimum amount you need to invest in a REIT is generally $500.
Purchasing a residential or commercial property to rent out to tenants
This is the age-old way to invest – seek out a suitable property that has the core purpose of being an investment.
Investment properties come in all shapes and sizes. On the residential side you have houses, units, townhouses, duplexes and studios. In the commercial space you have a range of different properties across commercial industries such as offices, warehouses, retail stores and hospitality venues.
Rentvesting involves purchasing a property and leasing it to tenants, while you rent somewhere else – usually in a more desirable suburb.
While it may seem counterintuitive, rentvesting is a good way to get a foot in the door of property investing. It allows you to purchase somewhere that you can afford, while living somewhere that suits your lifestyle.
Turning your home into an investment
There are several reasons why you might turn your home into an investment property. Maybe you’re relocating, downsizing or upsizing and wanting to hold onto your property until selling conditions improve. Or it may simply have been your plan all along.
Whichever the case, turning your home into an investment is a genuine way to invest in property. An added bonus is that many of your previous home-ownership losses would now become tax deductible – like interest repayments, insurance, repairs, water charges and council rates.
Claim everything you’re entitled to
Successful investors maximise returns by claiming all permitted tax deductions. When purchasing an investment, make sure you get a depreciation estimate early. This could help you claim back thousands of dollars in just the first year of ownership.
BMT Tax Depreciation provide obligation-free depreciation quotes across the country. Over the past twenty years, BMT has prepared more than 700,000 tax depreciation schedules, so you will have peace of mind knowing your depreciation needs are being looked after by the experts.
To learn more about depreciation, contact BMT on 1300 728 726 or Request a Quote.