Unlike some things, there’s more than one path you can follow to build financial freedom.
For my wife and I, residential property investment was our starting point, but it may not be our end point.
Nearly 20 years ago, we bought our first rental property—a simpler time when a 5% deposit was enough, prices were lower, and tax benefits like depreciation and offsetting losses against personal income were standard. Back then, you didn’t need two forms of ID for every transaction, and you didn’t need to comply with your bank criteria, the Reserve Banks criteria, and the governments rules for each move you made. But the environment’s changed. Rising regulations like the CCCFA (which restricted how banks conducted their own assessments) and taxes (like the [temporary] removal of tax deductibility, which is present in every other business activity) dulled the appeal of residential investing, leaving many landlords frustrated. What’s worst, it turned off the next generation of would be investors, for fear the same types of things could happen again.
If only there were a way to own property without the media scrutiny, shifting legislation, or unpredictable tax rules! Many would-be, and current landlords are fondling some pretty big questions right now, including whether residential property can still deliver capital gains that outweigh the growing hassles. Add to that the uncertainty of employment and a cultural shift among younger generations who are rethinking homeownership entirely, and the challenges stack up fast.
Some will turn to equities, some to crypto or precious metals, but I’m wondering increasingly if commercial property is the place to be. Many commercial property investors feel it’s a lifeboat for investors to jump on before the residential ship sinks. Commercial property offers advantages that I notice every time I explore this space, like:
- – No problems claiming interest deductibility (and depreciation).
- – No residential tenancies
- – More predictable lending guidelines (more conservative too, mind you)
- – Less expenses to consider
Recently, I spoke with Jack Revill and Carl Burling from the Provincia. They operate an unlisted property fund for wholesale investors, to gain exposure to a well-diversified set of commercial properties and tenancies.
For those new to commercial property, their insights are invaluable. Investing in a wholesale fund isn’t something all everyday investors can take part in, however there is a playbook for everyone here.
