IMPORTANT INFORMATION YOU SHOULD KNOW ABOUT PROPERTY INVESTEMENT

8 INFORMATION YOU SHOULD KNOW ABOUT PROPERTY INVESTEMENT

1. It’s easy to get started: You don’t need specialist knowledge to start investing in property: in fact, many property investors didn’t start off intending to make their fortune through property. Instead, they just bought a house to live in. It’s only after seeing the value of their home increase – and realising how much wealth you can generate – that many investors take the leap and start proactively investing.

2. It’s easier to research than stocks and shares: Playing the stock market requires a lot of education. You have to understand how the system works; understand the complex world of trading not least the different kinds of financial instruments used, as well as research brokers and fund managers. Once you’ve done this, you’ve then got to get to grips with the companies on the market – which involves trawling the financial press, annual reports, other company releases and so on. Investing in property, meanwhile, is much simpler: at its most basic, you can simply jump online and start looking at properties. Admittedly, there’s more to getting property investing right than just picking a property, but a significant amount of research can be done online and is usually either free or inexpensive or by visiting suburbs, open houses and auctions – without having to garner reams of specialist knowledge beforehand.

3. It’s relatively easy to get finance: It may not feel like it when you’re applying for a mortgage, but lenders like property. Home loans are a major part of any bank’s business model, and lenders are more likely to lend on residential property than any other asset class – as evidenced by the fact that they will lend a higher proportion of the value (up to 95%) and at lower interest rates than any other asset class – including commercial property. This makes it a lot easier to borrow to invest in property than in any other asset class.

4. 100% control: If you invest in the share market, you typically need to hire a broker to handle your trades for you, and the value of any shareholding is reliant on market conditions and the actions of the people running that company –introducing an element of uncertainty. This is much less the case in property: once you’ve settled, you directly own the asset and you have complete control over it assuming you can keep up the mortgage repayments, and within the bounds of planning law. That’s a hugely powerful thing, as it means that you can influence both asset worth by adding value and cash flow eg by raising the rent directly – something that’s nigh-on impossible to do with shares in a company

5. You can develop: Biggest risk and biggest reward is taking an existing property or vacant block. Subdividing and building upon it – usually units or townhouses. The profits can be substantial – if you can get it right. Buying property that can later be developed can equal massive profits. These types of opportunities cannot be found in other asset classes.

6. It improves your financial knowhow: Perhaps a left-field advantage, but investing in property improves your financial know-how. The simple act of saving for a deposit teaches financial discipline; working the numbers in terms of affordability prior to purchase is essential, and once an investment has been acquired, the juggling act of dealing with holding costs, rental income and tax benefits not only requires some monetary dexterity, but also makes you more capable of managing your money – and making the most of every cent.

7. It’s easier to hold onto if things go wrong: Margin calls are a common feature of shareholdings: essentially, if you’ve borrowed to invest in share, the margin call is when you are asked to deposit more money if the assets in your portfolio fall below a certain amount. However, it’s almost unheard of for a lender to ask you to top up a mortgage if a property falls in value – as long as you can keep up the repayments, you’ll be able to continue holding your property until its value increases again.
8. Still keep growing – even when you’re retired: Many investors following a capital growth strategy are putting together a nest egg for their retirement – whether that’s based on selling down and creating a lump sum, partially selling down and living off rental income, or on living off a line of credit. However, what some investors forget is that, even after they retire in, say, 20 years, yield and value will continue to improve – making you worth more each year.