Property investment - A Sturdy Market

BradYoung04Starred Page By BradYoung04, 26th Apr 2013 | Follow this author | RSS Feed | Short URL http://nut.bz/1ean_u0h/
Posted in Wikinut>Guides>Property & Real Estate>General

A guide into why property is still a sturdy and worthwhile investment.

Buy Land, Because God Aint Making Any More Of It

Many investments carry a certain level of risk. This is particularly true in these times of economic uncertainty. Since the financial crisis there has been a sense of trepidation from creditors and lenders, which is reflected by the volatility of the investment market.

As a result of this uncertainty it’s understandable that people have flocked to the investments that carry the lowest level of risk – so that they are more likely to pay off in future. You could get into the commodities market which is traditionally quite stable or perhaps start an art or wine collection that will gain value. Or maybe you could invest in some managed futures – but this is all just a little too complex and risky for some people.

A very sturdy market that continually pays off is property. There’s an old phrase attributed to the great humorist Will Rogers – “Buy land, because god ain’t making any more of it”. It’s certainly true that land is a finite and limited commodity, which is why many people are choosing property investment in these uncertain times.

Why Is Property So Sturdy?

You might wonder why property is such a solid investment. Forbes recently ran an article saying that the outlook for 2013 remains bright. After the property market crash, caused by the sub-prime mortgage fiasco, which played a huge role in the financial crisis there has been a gradual recovery – this has meant that if you have the capital available to invest it is very worthwhile.

Both foreign and domestic markets have illustrated that they are worthy of investment, with yearly property sale prices increasing through 2012 in the U.S. by 14%, the UK by 24% and Australia by 26%. There are many reasons for this stability including;

1) The need for housing is a constant, as population increases remain steady the demand is increasing
2) Rent is increasing steadily as demand escalates, providing a greater incentive for landlords looking for a steady income
3) Property values are increasing. This is a general point and only applies to certain areas in the U.S. but international property markets offer a wide range of choice

Property is an extremely important part of our economy and our society as a whole; in addition as it is a physical commodity it holds value much more readily than ephemeral things like stocks and bonds.

Things To Think About Before Investment

The main thing you need to think about is where you will invest. You could renovate some dilapidated properties in a crummy neighborhood and hope to sell them on – or alternatively you could invest in a nice apartment in an up and coming area and generate an income from rent.

If you’re buying internationally, you will need to do some considerable research. Some countries have very strong property markets but are quite difficult to buy in for foreigners. For example, China has many hoops investors must jump through before they can buy property.

Things to think about include;

Where? – In what country are you going to invest and in what region? It’s important to know this in order to get a sense of the average value of homes in the area and the growth trends for sale prices or rent
How? – Are you going to renovate for a quick sale? Or are you planning to rent your property to a tenant to generate income? It’s important to know this early on as preparations for things like insurance need to start
With What? – How are you going to pay for your investment, considerations include whether you are going to get a mortgage or pay cash for your property? You need to know where you stand in terms of finances and this will make for a more effective search when you look for properties to buy

These are the main considerations you need to make before embarking on your property investment journey. Knowing where you stand and what you want to do going in will make you better placed to make the right decision.

Renting

Buying a property and then having a tenant to pay rent is a very good way to make sure you have a steady income. This makes it a very attractive investment, as it can contribute to your monthly mortgage payments or provide you with a steady stream of disposable income.

There are some aspects that make this form of investment less attractive to some people. For example, owning a home and generating income from it whilst paying rent yourself on your own accommodation can feel like a backwards step.

It’s a big question you need to answer, sell or rent it out? An article on Technorati discussed the pros and cons in great detail and may help you decide.

Things to be aware of when buying and renting to tenants include;

Insurance Is Important – You are still responsible for the property despite not residing in it yourself. As a result costs for repairs and maintenance will fall to you, if you don’t have the money to deal with this as it comes then you may face difficulties. Landlord insurance can help with this so make sure you get a landlord insurance quote before you buy for an idea of what your premiums will be and what exactly will be covered
Tenants Can Be Tricky – Most people have been a tenant at some point in their lives. As a result of paying good money to occupy your property tenants can be quite demanding. You might have problems with tenants too, so it’s good to be aware of this going in – although insurance can often help you out with lost rent
Property Management Services Are Not The Be All And End All – Some people think they can buy a property and simply outsource all the management duties. This is true, but the services management companies provide vary widely – and you are still ultimately responsible for the property. They can also be very expensive, especially if the services are comprehensive. Good property managers can be as hard to find as good tenants, so you may have to consider managing it yourself

Overall, renting your property to a tenant can be a very good investment and you can see a return quite quickly. However, markets change and can turn around on you in terms of the rent amounts – additionally there may be some instability to your income if your property is left vacant for a period of time without a tenant.

Selling

Buying property for a later sale is probably the most popular way to invest. It can be very appealing. You don’t get the steady trickle of income, but once your house is sold you can recoup your investment and make a healthy profit.

As with all investments, there are still considerations you need to take into account before pursuing this form of investment. For example, are you going to stay in the property whilst it is in the process of being sold? Perhaps you have another property to dwell in during the sale process; this may make things easier in a practical sense.

You should take into account the following when thinking about buying property for a later sale;

What Are The Values Like? – There is absolutely no point in buying a property that you are going to sell on at a loss. Heavily researching the property values in the area you are going to buy and looking at the year on year trends for an idea of whether the average values are falling or rising is important to know
Do You Have Funds To Renovate? – You need to calculate your costs in terms of the price of the property you can afford to buy and mortgage interest, but you also need to think about renovations. The majority of homes that are bought to be sold are renovated so that they add some value. As a result you need to budget for this at an early stage
Selling Can Be A Lengthy Process – Generally speaking it is quicker to find a tenant than a buyer. Many houses that are perfectly good and well-priced remain on the market for a long time. Consider whether you can wait for 6 months to a year for a return on investment once the property goes on the market as you never really know how long it will take

Buying for a sale is an excellent property investment, as it can pay off big in a relatively short space of time. It would take years to accumulate the sort of funds you can gain from a sale by renting.

Investment House

The property market has many different facets, all of which provide some incentive to invest. For example you could buy a home abroad and rent to vacationers on a weekly basis, this way you can use it for part of the year whilst still generating income.

You could also invest in commercial property. Buying a designated commercial property can be very good for rental income. You could even buy land and build a brand new house for a sale or rental. In any case, there are many ways to make money in property and the market still provides plenty of opportunity for investment.

Thanks for reading. I’d love to know what you think so please feel free to comment below. If you’d like to learn more then please check out the rest of my contributions to WikiNut. I would particularly recommend “U.S Properties: To Rent Or To Buy?” for more property related information.

I write on a number of subjects, and on a number of platforms so please follow me on Twitter for the latest news and updates - @BradYoung04

Tags

Becoming A Landlord, Buying A House, Landlord Insurance, Property Investment, Renting A House, Selling A House

Meet the author

author avatar BradYoung04
I am a MBA grad who can transform your business. Follow me for straight talking insights into running successful businesses in a fast paced world. I am always working or surfing in the Californian sun

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Comments

author avatar Rose*
27th Dec 2013 (#)

My advice is to pick the best location you can possibly afford

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