We Aussies love being our own bosses. As indicated by Independent Contractors Australia, 17.2 per cent of workers in the country were self-employed by 2013, which translates to around two million people.
However, being a self-employed worker means that you face certain risks and challenges that ordinary employees would not. Taking out a self-employed home loan to invest in property is a good way to meet these, particularly in the coming year.
According to a January 20 release by the Property Council of Australia, housing construction had a strong year in 2015. Citing figures from the Australian Bureau of Statistics (ABS), there were 215,329 building starts – an 11 per cent increase over the year before.
This means there’ll be plenty of fresh supply hitting the market in 2016, ready for you to scoop up. With this in mind, have a look at three reasons why self-employed workers should consider investing in property.
1) Rental income
Self-employed workers often face the challenge of having erratic cash flow. This happens to be the same factor that makes it a struggle to obtain traditional types of finance. While ordinary workers receive paychecks on a regular basis, many business owners simply pocket what’s left after wages and other costs have been paid off.
The danger of this is that when business is going slow or clients and customers are lagging in their payments, it can be crippling – particularly if a large expense suddenly comes up and you don’t have sufficient funds currently on hand.
Investment properties are great for this, as they provide a steady stream of rental income (providing there are tenants). However, this will only really remedy cash flow issues if the home is positively geared, which is when the rent coming in exceeds costs and mortgage repayments on the home.
2) Capital gains
As a business owner, there’s always the risk of facing hard times, be it economic downturn or unforeseen business failures. Perhaps you might even have had to shut your business down for whatever reason or decided to move on to different things. Having that extra property is a great asset to have on a rainy day.
More than 91 per cent of properties that sold did so at a profit.
If you’ve purchased a property with a self-employed home loan and held it for quite a while, it’ll most likely have made some capital gains. If you want an example, look no further than the year that has just gone.
According to CoreLogic RP Data’s Pain and Gain report for the December quarter, more than 91 per cent of properties that sold did so at a profit. Furthermore, 31.4 per cent of homes sold for more than twice their purchase price.
As you can see, making clever real-estate purchases and having great patience is usually rewarded with hefty capital gains. In fact, only 1.7 per cent of sales in Sydney sold at a loss, which is a record low. This profit you make can be used to hold you down or take you to your next business opportunity.
Having that secondary property gives you the option of simply running your company from there.
As a self-employed worker, having an investment property gives you that extra roof under your name, which can give you great flexibility from a business stand point. For instance, many people run operations from the comfort of their home. If business has boomed, you might feel like it’s time to expand the company. Having that secondary property gives you the option of simply running your company from there, or moving into it, and working from your current home.
In the market for a specialised product like a bad credit, self-employed or low doc loan? Get in touch with Redrock, where we can sort you out with a solution.