Investing in Properties ..
According to most economists , In these changing economic times, good property investment is needed more than ever. Property has proved a relatively secure investment all over the world.
One could safely expect returns of above 8 per cent a year in most metropolitan markets. In general, property is considered a fairly low risk investment, and can be less volatile than shares and the stock market , although, this is not always the case .
Historical returns from properties have been somewhat lower than stock market returns over the long run as measured over the length of a few decades - housing has turned in an annualized return of 8 - 9 % whereas major stock markets have given 13.4% returns or even more in some parts of the world.
For a successful investment in properties , we must acquire the right property in the right location at the keenest possible price and with its long-term viability in mind , with regard to both terms of good rental potential and capital growth .
Starting young - Property prices always go up and even if you don’t see huge growths in the first year or two the sooner you buy an investment property the better . There is no wrong time to buy if you buy the right property, because even if you buy just as property prices are picking in a good area you will still see a substantial long-term growth.
Some of the major advantages of investing in Property
1, Long Term Investment - Most people like the idea of having an investment that can fund them at a later stage in their life . Housing is one sector that rarely sees a downward trend since there is a growing demand , making it a good potential option for long-term investments
2, Safety aspect – Buying property is a relatively low-risk investment. Property fits this criteria with returns reaching 10% or more per year. Housing in metropolitan areas is constantly in demand.
3,Tax benefits – A number of deductions can be claimed on your tax return - such as interest paid on the loan, repairs and maintenance, agent's fees, travel to and from the property to facilitate repairs, and buildings depreciation..
4,Positive asset base – There are many benefits of investing in a property.Showing your potential lender that you have the ability to maintain a loan without defaulting will be highly regarded. Owning a property can also be useful as security when taking out another home, car or personal loan.
Some of the major Disadvantages of investing in Property
First and the foremost disadvantage would be
1, Liquidity - No doubt you can sell the property if one;s financial situations go bad. However this can take many months unless willing to accept a price less than the property is worth. .
2, On going costs - Maintaining a propertyt is expensive . In addition to the standard costs associated with a property like tax , ongoing maintenance costs, especially with an older building, can be substantial.The longer you plan to own the property, the more you'll probably need to invest in maintenance, repairs and improvements...
3, Property over supply - This can lead to builders building too many high rise buildings, and the over supply can and does bring down the rentals.
4,Vacancies – This can prove to be very expensive , when there are going to be times when mortgage payments will need to be covered out of your own pocket due to your property lying vacant for some reason or the other.This could just be a gap between tenants or because of maintenance issues...
5, Capital Gains Tax - When and If you decide to sell your property , one has to pay Capital Gains Tax on the appreciation of investments which can be a considerable amount especially if the property markets have sky rocketed .
Some useful tips
1, Avoid buying property on an impulse - research the area that you are considering thoroughly before you commit to a purchase.
2, Once you have found a good property ,it is wise to go in for an independent property valuation before you decide to buy .
3, Consult a legal expert before you sign any documents regarding the property agreement or sale deed.
4, Interest costs and property-related expenses are tax deductible. Your accountant would be the right person to advise you on those issues , also it is better to speak with your accountant about the issue of depreciation...
Investment in property is still an excellent option and is usually prone to less volatility than shares. The investment in this sector is relatively a safe form of long term investment.