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Is Cairns a Good Place to Invest in Property (Pros and Cons)

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Is Cairns a Good Place to Invest in Property?

With the property market maintaining its strength, many people are turning to this asset class to secure their future or create a passive income for themselves. Like any investment, such as diamonds, crypto or the stock market, putting your savings into the property market carries risk, but it can also prove bountiful for savvy investors who buy and sell at the right times.

Before you tie up a large amount of money in a property you should understand the pros and cons and if this type of investment matches your financial position and goals.

Pros of investing in property

Investing in a house, unit, or block of land can feel more secure because it is a tangible asset that you can see and touch unlike other investments such as shares. If you had to, you could use the property as your home (although this may not align with your investing goals) and you can personally make improvements to it to increase its value.

Generally speaking, the property market experiences less volatility than other asset classes. However, you should do your own research or engage a buyer’s agent if you are not confident in your own knowledge of the property market, as not all property will increase in value at a rapid rate.

One of the biggest bonuses of investing in property is that the asset can be used for income while it is gaining in value. If you are lucky, you can rent the property out at a rate that covers the expenses (for example, mortgage, insurance, and rates) or very close to it. Your property expenses also lead to another benefit: tax deductions. Your costs can usually be offset against the rental income, including the interest on your loan.

Cons of investing in property

One of the biggest negatives of investing in property is the large upfront cost required. Unlike dabbling in shares, which you can do with hundreds of dollars, you will need tens of, if not hundreds of thousands to purchase an investment property.

Additionally, the ongoing costs can become overwhelming, particularly if interest rates rise or there are periods of vacancy. You should make sure that you will not feel financial stress if you are required to pay the mortgage on the property without income from a tenant.

If you do need to sell due to rising costs, you cannot simply sell off part of the investment (with the exception of subdivided land). You would need to sell the entire house or unit, compared to other investments where you may be able to offload a portion of the holding for some quick cash.

If the value of the property has gone down when you sell, you may end up worse off than before the investment after you have accounted for the costs. This is because you will need to factor in extras such as bank and transfer fees, legal costs, real estate agent commission and marketing, and any other funds you’ve put towards maintaining or improving the property for rental purposes or in the hope of making capital gains.

How should I prepare myself for investing in property?

There is no right or wrong time to buy an investment property. You should only venture into the market when you feel ready. Speaking to a financial planner can help you to make the decision either way or guide you to when you may be financially ready.

What costs are involved with investing in property?

Investing in property has the potential to be financially rewarding and can be a fantastic way to secure your future. However, a large financial outlay is required and if you don’t do your homework you run the risk of having to sink more money into the property, which could affect your overall return.

Buying costs include:

  • stamp duty;
  • transfer fees;
  • legal costs;
  • search fees; and
  • pest and building reports.

Selling costs include:

  • agent’s fees;
  • legal costs;
  • marketing fees;
  • mortgage break fees; and
  • capital gains tax (if the property has increased in value when you sell).

What costs are involved with owning an investment property?

The costs don’t stop once you’ve settled on your new asset, and it is important to keep in mind that there are ongoing costs related to investing in property. These include:

  • council and water rates;
  • body corporate fees;
  • building and landlord insurance;
  • land tax;
  • property management fees; and
  • repairs and maintenance costs.

Only you know if you are ready to begin investing in property, but if you need advice or assistance with financial planning you should seek the guidance of a professional who can listen to your financial goals and help you align your investments to them. If you are looking to purchase an investment property, please contact one of our experienced mortgage brokers today on (07) 4052 0751.

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