The Pros And Cons Of Having An Investment Property
Property is considered to be a secure form of investment yielding a relatively high percentage on return. Like any other form of investing, it has its own set of advantages and disadvantages. It is therefore important to make the right choice by seeking good and valuable investment advice before executing any deal. Property investment unlike share market trading is much easier to understand and can easily be practiced even by novice investors. It is also considered to be a more stable and comparatively low risk investment.
With the rise in population, there will always be a demand for land and real estate, creating a substantially higher return on investment in the long run. A gradual shift towards urban civilization has created a huge demand for rented homes. Unlike setting up any other business, a real estate business does not require a huge capital to get started.
By claiming several deductions such as interest on loan, real estate agents fees, maintenance and repairing cost and building depreciation, a substantial amount can be saved on taxes. Property investment is viewed as a long-term form of investment generating income for several years. Being easily influenced by market trends and inflation, property investment has a history of generating solid capital gains. Considered as tangible assets, properties can easily be sold any time when needed in contrast to other forms of investments. Properties provide a firm positive asset base when considering further investments or taking loans. A solid property portfolio provides a security for future investments.
Along with the benefits there are also several drawbacks associated with real estate investing. This needs to be carefully considered and thoroughly examined. As an investor, you also become a landlord should you choose to lease. This can bring about several time-consuming responsibilities and expenses. Acquiring bad tenants poses several problems. They can cause considerable damage to the property in addition to delay or non-payment of monthly rentals.
Forcing the tenants to vacate the property and settlement of disputes may take several months to resolve. With property investment comes several ongoing costs. These include maintenance costs, taxes on capital gains and costs involved in purchasing and selling of properties. In the event of the property remaining unoccupied for several months, mortgage payments become a great liability. The tax benefits associated with the property can only be utilized at the end of financial year, blocking your cash flow for the time being.
With more and more people plunging into the property market, competition is on the rise. Before making any decision it is best to speak with a financial advisor and weight up the good and bad points. On a grand scale, one must see property investment as a long-term purchase and doing so will reward you very handsomely.
Michael Selman is an experienced property investor and has been investing for a number of years. He currently works with a group of strata managers, offering property management for many buildings within the Sydney region.