Investing
in property is one of the four most common types of investments. Together with
investing in cash, bonds and shares, property investment has many other forms ranging
from buy-to-let (rent) to property fund investment.
Like the
main aim of investing in general, property investment relies on its potentials
of making a return of your money (investment). If the property you have is for
rent to tenants, the income is in the form of rentals.
If
you have bought property and then sell it for higher price, the profit is your
income. You may not own a property yourself, but you can have these potential benefits
indirectly by investing in funds that are investing directly in properties.
Property
maintenance and management services of properties are also forms where income
can be derived.
Collective property investment fund
One
of the many ways in property investment is joining collective property funds. In
the process, a professional manager collects the money from the many investors
and invests the money directly in property or in property shares. (Property
managers naturally charge fees for their services, which chips into your
potential earnings.)
There
are many common examples in the market today regarding these property funds.
These include property unit trusts, property investment trusts, offshore
property companies, real estate investment trusts (REITs), shares of listed
property companies and insurance company property funds.
Risks
One
of the most obvious risks in property investment is the fact that property
prices and demands for rentals can go and down. This would point out that
direct and indirect property investments need to be there longer than other
investment types.
The
action is your willingness to wait out the spikes and lows of the market. This
is the only way to ride out the losses in a slow housing market and earn
profits again when times are better.
Over-investment
If
you have over-invested in properties (meaning most of your money is tied in a
buy-to-let properties), for instance, you might find yourself in trouble when
the housing market slows down.
If
you’re over-invested in property – for example, if most of your money is tied
up in a buy-to-let property – you might end up in trouble when housing markets
slow. The antidote here is the time-tested (and smart) method of diversifying
your portfolio to cover many kinds of investments.
General risks
In
comparison to bonds or shares, property takes a longer time to sell (thus
liquidating it and making your profit). Buying a property is one big
commitment, like putting all your eggs in one basket. Buying residential properties
for leasing has many costs that can be substantial when added up.
Property
needs maintenance work. Managing property takes times and money and work from
you. If you don’t own it outright, you might want to extend the lease. This
also takes additional costs and may need negotiations.
Added
risks are also looming if you use mortgage or a loan to buy property since
mortgage costs can rise. If you cannot
keep up with the repayments, the banks can take back the property. Investing in property Brisbane has to have more than common savvy from anyone.
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