Why You Should Invest In Property
If you have carefully been building your nest over the last few years, then you probably have a goal in mind for when you get to your retirement. Financial planners are keen to make people understand that you need 25 times the amount you want to retire on investments. This might seem like a bit of a leap, but if you diversify where you put your money, you might just find that it isn’t that hard to reach.
But when it comes down to it, there is one investment that seems to pull in the big bucks over the long term, making it a more certain investment. Real Estate has many advantages over other kinds of investing stocks, mutual funds, or bonds. There is a predictable cash flow, which you have a lot of control over, and it offers equity too. Real Estate is a self-sustaining asset also. Working with Prosper Group property managers will put you in the best position to find properties that will compliment your goals.
Here are a number of reasons that you should invest in property.
Appreciates in Value
Appreciating in value means that there is an increase in the value of the asset over time. Since 1968, and including the economic downturn in 2007, Real Estate has seen a rise of roughly 6% per year. Which means a property purchased now, will continue to rise in value.
You cannot paint or build an extension on a stock. The stock will always be what it is. However, you can actively improve the properties that you have invested in. Assets that are tangible in most cases can be improved upon.
While it might require some more financial investment, and sometimes, usually that investment will pay off and the property will be worth more. You can capitalise on the property, but you should ensure you don’t price it out of the area it is located.
There are several reasonable expenses that you will incur while taking care of the property. Maintenance, improvements, and the interest paid on the mortgage. Homeownership comes with many deductions that can offset the income from the property and help you lower the taxes.
Read more about how you can save more on your property tax deductions.
One of the most significant benefits to Real Estate as an investment is that the mortgage is often paid off the same time as you are likely to retire. Mortgages over time are paid down, and many people view this as a forced savings plan.
It yields a more significant amount as time goes on, which means it is the perfect investment for retirement. Your cash flow increase will coincide nicely with when you are likely to finish full-time employment.
Although you can make learned estimations about how well some stocks are likely to do, you can’t ever say that it will provide you with a predictable and (to some extent) controllable cash flow. But with real estate investments, you are likely to see a 6% or higher cash flow.
The chances are you will have a range of tenants that will pay X amount per month, giving you a predictable and stable income.
One of the significant benefits of investing in Real Estate is that you have diversification potential. Due to the fact that Real Estate tends to appreciate, even when your other stocks, mutual funds and other investments aren’t going well, your Real Estate investment isn’t as volatile.
Real Estate can be used to leverage; this means using the property to buy more properties. Consider the fact that as little as 5% of a deposit can get you 100% of the home then you want. Financing for the property is readily available for many different types of people.
If you have bad debt, it is easy to think that you won’t be able to get the finance to afford a property. However, there are more factors than just bad debt that goes into the decisions, and there are many opportunities for you to apply for mortgages with companies that specialise in mortgages for bad debt, or poor credit ratings.
Real Estate Investment Trusts
REITs give you the option to invest in properties but without the need to own or manage those properties. It is often an ideal option for people who want to learn more about Real Estate and decide if they’re going to eventually manage properties. You can buy and sell publicly-traded REITs on the major stock exchanges. It is often easy to get into and out of positions as they tend to trade under high volume.
It is easier to get a mortgage on a property when you are younger. One of the factors that banks take into account before they approve a mortgage is the number of years you have ahead of you to pay the loan back. Not only that, but there are many different first-home-owner finance and grant options that can get you on the property buying ladder for as little as 5% deposit.
You can’t rent out the home straight away in most cases due to some of the restrictions, but you can usually rent it out after a year.
Every time you make a mortgage payment, your mortgage will go down. Not only that but you own more and more of the property too. The income from the rentals will cover the mortgage (in most cases), have some set aside to take care of the repairs, and leave a little leftover.
In the end, you will own 100% of your property, but your tenants will have paid for the mortgage – in most cases 90% of it or more.
Aside from Real Estate being less of risk than most other investments, it can also give you more security too. If something should happen in your personal life, and you are in need of somewhere to live, there are many options for having your home returned to you with speed if required.
If you decide to travel, you can arrange to return when the lease of your current tenant is up too. Purchasing Real Estate gives you lifelong security.
Every year a number of developers will get contracts for building new properties in a range of areas. These are typically in areas that are likely to see a cash injection or already have great transport links. They are likely to rise quickly in value, and getting in early can bring a lot of benefits.
It is important that you spend time researching these developments and looking at future plans for the location. This can often be an indicator of the demographic of people they will hope to attract.
There are a number of risks that come with purchasing properties as a rental opportunity. However, if you buy your next property too quickly, you might have a big cash dip between renting the property out, mortgage payments and more. Ensure that you have a positive cash flow before expanding your portfolio.
You should also ensure that you have the right insurances, and maintenance for the properties because as the landlord, you are liable for a number of things within the property. So account for these costs, and you shouldn’t be left out of pocket.
Using properties as a long term investment is a smart thing to do. But it shouldn’t be something that you rush into. Research how the Real Estate market works, and consider hiring a property manager to ensure everything is running smoothly.