The property market in Australia is absolutely booming right now. It has turned into one of the largest industries in the country. Last year the property market contributed 11.2% to the gross domestic product (GDP) and created over 1.1 million jobs. While the property market is doing really great there are always pro’s and con’s to any industry. Below is a highly beneficial break down to take into consideration when looking into property.

The Pro’s

• Property can be less volatile versus investing in the stock market
• You can earn additional streams of revenue through rental income and benefit from capital growth (if your property increases in value over time)
• If you take out a loan to purchase an investment property, interest on the loan and most property expenses can be offset against rental income
• You are investing in something that is a tangible asset

The Con’s

• Rental income may not cover your mortgage payments or other expenses so you may have to use other money to cover these costs
• An increase in interest rates will increase your repayments and decrease your disposable income
• You can potentially lack tenants and experience vacancies during which periods you will have to cover costs
• If the value of the property goes down you could end up owing more than the property is worth, this is known as negative equity
• There are very high entry and exit costs such as stamp duty, legal fees and real estate agent’s fees

Don’t invest only in property. This is a common rule when you really invest in anything and that is to always diversify. If you invest exclusively in property, you will have a lot of money riding on one market sector. If you also own your home, you will have all of your wealth concentrated in the residential property market.

So it’s a great idea to at least diversify between residential and commercial so your risk potential stays low. Investments such as managed funds and ETFs allow you to invest in a broader range of assets. Don’t keep all your eggs in one basket!