Should I consider purchasing an investment property?
We are in an era where most investments struggle to match inflation and any investment paying anything approaching double digits should be thoroughly investigated. It is not surprising therefore that many individuals are now looking at investment properties as a very real alternative to stocks and shares. Not only is there a great opportunity for capital appreciation, the chances of earning an income and therefore a yield are also high.
Like with all investments, time and consideration should be put into this before jumping in with both feet. There certainly are some massive benefits to owning investment properties but that doesn’t mean that it is all plain sailing. More often than not, investing in property anywhere involves relatively large sums of money, much of which will be tied up for at five to ten years. You therefore need to be sure that you won’t need capital during this period as one, it is fairly illiquid and two, there may be some hefty redemption penalties.
If you have decided that you wish to explore the possibilities of investment properties further you have factors like location, price and the property itself to consider. Location is arguably the biggest factor as people need to want to live there. Think: “Regardless of market conditions, would I want to live here in 10 years’ time”. Also, you no longer have to think about the location of the property being close to where you currently live. The internet and management companies have made it far easier for you to own property further away where perhaps the returns are greater. The property and price are fairly obvious considerations.
When thinking about investment properties, would you explore the idea of owning a property overseas? Obviously, you would need to do A LOT of research and do some very careful planning but often the returns overseas are far higher than you can get in your home country – often with lower initial levels of investment required. What is even better is that rental guarantee concepts are becoming increasingly common where you know exactly what annual return you can expect without having to lift a finger!
The options really are endless if you start to consider the overseas options. Yes, they certainly aren’t for everyone and there are numerous reasons why you should avoid them. However, this is the case for almost any investment, you can come up with far more reasons why you shouldn’t invest than why you should. The sad reality is that you need to invest in something otherwise you are effectively losing money, it is just choosing the right option for you.
Where you are in the investment life cycle and how much you have to invest are probably going to be the determining factors when it comes to choosing your investment. In truth, if you are still young and have little capital or other investments then investment properties probably aren’t for you. You need to start building a diversified portfolio and an investment property would form too large a part of that portfolio.
If you already have a reasonable amount of other investments and an “emergency fund” of cash then they are well worth considering. They will add diversification to your existing portfolio whilst at the same time giving you a residual income. If you are at this stage then arguably it is case of which investment property you should buy as opposed to if you should buy one at all.
If you are considering purchasing an investment property and you would like to speak to a reputable team of advisors, why not contact to Emerging Trend Advisors who will be able to advise you on the range of option that are available to you.