Property investment is one of the best ways of creating wealth and securing financial stability for the future. Even during the current economic climate property is still an excellent investment, yet it's also important that new investors understand the reality of the business and any potential disadvantages. And this is where anyone hoping to invest in property needs expert advice.
Firstly property could be termed an "illiquid asset." What that means is that if you want to release cash quickly, it can take some time before you get your hands on it. However if you have some equity in the property some mortgage companies will allow you to borrow more funds and will release the money fairly quickly.
Secondly you need to commit the time and money to maintain the property. Renting the property to tenants means probably dealing with a letting agent, ensuring your tenants pay on time, being able to cope in the event that the property is empty for a month or two, or you may need to carry out repair work.
There's also buildings insurance to pay and some countries require that landlords adhere to certain regulations such as schemes to protect security deposits or energy efficiency inspections, which all cost money. Make sure you find out about all the rules and regulations for landlords and your tenants.Finally if you compare property to other types of investment such as a pension fund or savings, there is a time commitment. You have to spend time making sure your properties are well managed and in good working order.
Pensions and savings on the other hand are something you really don't need to think about on a regular basis and they manage themselves. Someone else is looking after your money and all you have to do is make any monthly contributions... and just hope you have enough to retire on!
Therein lays the biggest problem. Far too many of us put too much faith in other people for ensuring we have enough money to retire. But who's going to bail you out if you have a pension shortfall? Not the government... state pensions are declining year on year.
Investing in property allows you to take control of your financial destiny and as long as you buy the right property in the right location by doing some research, and have planned for any risks in advance, the advantages far outweigh the disadvantages:
You are rewarded with a much bigger asset than your initial capital investment
Tenants pay the mortgage for you
You can control any equity built up and decide whether to reinvest in more property or withdraw it to live off the interest and retire
Best Wishes
Clayton J.Moore
The Reality of Property Investing