If you are looking for ways to build your wealth and make long term investments, then property investment is something to consider. Property investment, with the right knowledge of the market and good decision making, can be a lucrative business opportunity.
Using real estate tools you can find all the resources you need to get started. There are many pros and cons to consider when looking into property, here are some key reasons why property investment could work for you:
Properties increase in value
There are certain large purchases you make in life that are sure to depreciate in value, new cars are an example of this. By investing money into a property, such as making smart renovations or extensions, you can increase its value significantly. This is only the case if you spend wisely and research property values in the area.
Be in charge of your investment decisions
Another plus point to property investment for many people is the opportunity to be your own boss and make decisions for yourself. If you take a hands-on approach to managing your own property portfolio, you will decide which properties to buy, how much rent to charge, who to rent to and how you are going to manage the day-to-day running of it.
However, you are also able to utilize the services of an investment company or portfolio manager to make these decisions for you. The approach you take may depend on the time you have, the budget and your current knowledge of real estate and investing.
If working with other parties, be sure they are fully accredited and have the correct credentials for the services they are providing you in the location they are operating.
Increasing inflation can work for you
High inflation is problematic for some types of investing but not so much for property investment. When inflation is high, you can increase your rental income and you will see the value of your properties increase. On the flip side, some of your associated costs will also rise. This may cause dispute amongst your tenants however; with inflation they should already have an understanding that unfortunately everything will be going up, but just ensure to make sure this does not go against a signed contract agreement.
Types of income
There are multiple types of income you will receive (or hope to receive) from property investment. The main two you will come across are capital appreciation and cash flow.
Cash flow is the profit that you will make each month from rental income. Whereas capital appreciation is the increase in the value of the property over time.
Generally, the aim is to buy when house prices are lower and if you sell, you want to sell when the property has appreciated value and the selling price is significantly more than what you originally paid for it.
Unlike many other types of investment, with property you have leverage. You can use the property in order to secure a mortgage or loan and maximize your investment. In comparison, the bank will not lend you money for the purchase of shares.
There is of course interest to consider on mortgage or loan repayments and you will need to factor this into your cash flow forecasting.
Final comments
If you are thinking of giving property investment a go, ensure that you do your research and fully understand the risks involved. Property investment is generally a longer-term investment opportunity, so don’t expect to make significant financial gains overnight.
Cutting corners, such as failing to carry out necessary checks for not keeping a rental in good condition can cause you issues down the line and should be avoided. The most alarming issue that gets overlooked the most in rentals is the issue of mold. It is essential when renting out a property to ensure that the safety of your tenants comes first. A great example can be seen in the English case of A.Ishak. Just remember that profit should not always comes first with property development, safety and habitability should be a high focus.
On the whole, property investment can be an interesting and profitable investment decision when done with the correct knowledge and following the right processes.