Up until now, we have based our discussions around investing in residential property, but this is only one of many alternatives.
In this blog, we will discuss:
– Direct Property
– Indirect Property
This refers to property that you (and any others you may care to join with) purchase and have your name on the title. You therefore have the ability to manage it and make decisions when to buy or sell, who to let it to and what improvements or changes to make to the property.
This may be an investment in listed (on the ASX) or unlisted property. This is usually distinguished by managers making the decisions discussed above on behalf of many small investors who have chosen this way to invest (usually) smaller amounts and accept that they are not involved in the day-to-day decision making.
This includes factories, workshops and other types of properties found in industrial estates or areas. They are therefore tenanted by mainly businesses and therefore impacted by local business conditions: if business is going well, there is high demand for these factories, but if business is in decline , it can be hard to find a tenant. The are often characterised by short term (or month-to-month) tenants and therefore can suffer from periods of vacancy. Leases on these types of properties generally require the tenant to pick up most of the holding expenses (rates, water rates, etc.) and often have clauses that enable the landlord to remove the tenant easily and quickly in the event of the rent not being received on time.
This includes shops, cafes, restaurants, offices and other buildings you may find in strip shopping centres. Like industrial property, these properties are severally impacted by the health of businesses and therefore in good times and locations can command a high rental but in poor times can find it hard to find a tenant. Generally, the leases on these properties give the landlord the ability to react quickly should the rent not be paid on time or some other misdemeanour occur.
By far the most popular form of investment in property is residential property. Although it can often be harder to get rid of tenants who fail to meet the conditions of the lease (due to laws designed to protect the tenant’s rights), it is generally accepted that demand for places to live is always higher than demand for factories and shops. Capital gains in the long term are also generally greater.
I like DHA homes as a good, safe property investment and will devote a later blog to outlining the advantages and disadvantages of this type of investment. In the meantime, should you wish to learn more about this type of investment, I recommend a visit to the website www.dha.gov.au.
Happy property searching!