Why I Like Property
Are you confused by all the media reports about the property market? One day it's boom, boom, boom, the next day it's doom, doom, doom. So what is it? Doom or boom? While I don't have a crystal ball I thought it was time I shared my thoughts with you on why I like property.
What this article won’t do:
- Present any charts - because you can make almost any product look favourable depending on the timeline used.
- Give an opinion as to the future direction of the property market.
What this article will do:
- Focus on the facts.
- Compare property to the sharemarket.
Reason # 1 - Add-Value
You can buy a run down old property and increase the value of your investment by getting your hands dirty, or paying someone to get dirty! Hard to add-value to the Commonwealth Bank shares I own. Sure I bank with them… but I don’t really think my day-to-day savings account is really going to add much value to my stock portfolio!
And sure, I can vote when it comes to the AGM – but are my 1000 shares really going to make a difference?
Installing new carpet, painting and adding new blinds… that makes a difference!
Reason # 2 – Limited Supply
A builder once said to me “you can’t make property from a plastic mould”. I like that property takes a while to plan and build because, in my opinion, the demand and supply equation has lots to do with the price of property.
A development across the road from where I live has been in council for 3 years now… and will probably take 2 years to build. That’s five long years for the developer!
With shares, however, the company can make a capital raising at any time or issue options to directors or employees. This type of activity can dilute your shareholding making your piece of the pie smaller.
It's hard to issue land in Bondi for instance!
Reason # 3 - Capital Gains Exemption.
Unlike any shares I currently own, the home I live in does not attract capital gains tax. This has been lucrative for many Australians and I can't see the law changing in this regard for a long time.
Reason # 4 - KISS (Keep it Simple Stupid)
I like property because it's easier for me to understand compared to shares.
Granted I work in property, but, I know if I buy a property for $500k, I can get $600 a week rent. There will be expenses that I can work out and I can use the Washington Brown depreciation calculator to work out my depreciation claim . Simple.
Have you ever read a share prospectus or company annual report and completely understood it?
KISS.
Reason # 5 - Master of my Domain
I like property because I can be master of my own domain. I can be the CEO of my investment property, the CFO of my investment and answerable to the board directors that I care about, my wife.
I don’t know about you, but I’m pretty sick and tired of golden handshakes to CEO’s who have done the wrong thing to their staff or shareholders. I’m over self-interested company directors that pretend they have shareholder company value at heart… do they really?
As the CEO of my investment property I can guarantee I’m looking out for number 1!!