Why property investment is for you probably is the first question anyone would ask before getting into the very investment trench.
We pretty much got used to the idea that if anyone asks us a question on the property, we just point to the relevant blog post and let them digest the content by themselves.
When our younger one in the house asked why should anyone invest in property, we didn’t have a relevant post.
That should have been the basic post to just outline why to invest in property at all.
There you go then:
If you are new to property investment and would love to understand why at all should you invest in property, here are those 15 reasons as a quick list.
Table Of Contents
- 1) Value Appreciation
- 2) Year On Year Increase In Your Net Worth
- 3) Security
- 4) Multiple And Flexible Strategies
- 5) Leverage
- 6) Building Equity Incrementally
- 7) Instant Gain on Investment
- 8) Stability
- 9) Income From Expertise
- 10) Predictable Income From Property
- 11) Inflation
- 12) Capital Gains Tax Advantage
- 13) Asset Ownership At Low Cost
- 14) Generational Wealth
- 15) Building A Closed Network
1) Value Appreciation
Appreciation goes hand in hand with property investment. It refers to the increase in value of the actual property over time.
Appreciation can be a handy strategy when demand for houses in certain areas rises and but there is a very low supply meaning the value of the property may rise.
People will be willing to pay more money to obtain the house because there is simply less of them.
In essence, investors can cash in on this opportunity to earn more than what they may have paid for the property in the first place, demonstrating how demand can affect the value of appreciation.
2) Year On Year Increase In Your Net Worth
Your Net-Worth relates to the value of your assets minus your liabilities. It’s important to have a high amount of assets and a low amount of liabilities. Owning a property is a “High Value” tangible asset that can appreciate over time.
Buying multiple properties and building a portfolio sets you up with multiple assets which are all increasing in value over time.
It is well understood that compared to stock trading there is something that is tangible to touch and see.
In the event of risk or something going wrong within the investment, you have an asset that can still be sold to take out your money.
While this may not be for everyone, a property is accepted within the financial world as a security for any future funding requirements.
4) Multiple And Flexible Strategies
Property can have different use cases including letting to families, renting individual rooms, commercial use, serviced accommodation and others. This gives great flexibility to define a strategy that suits your interests and would like to become an expert at over time.
Leveraging in property works by using existing equity from another property to buy or invest in a new property. This method can be repeated over and over when equity is rising on each of your properties.
This prevents you from having to worry about digging out cash for every investment and allows you to buy a property without using your own money as a best case.
6) Building Equity Incrementally
When paying your mortgage month on month, the Equity in the property will see an incremental increase. It can also rise if the value of your property increases.
Equity can be very useful for paying off any current or future debt, planning for retirement and even buying a new home outright.
7) Instant Gain on Investment
If you go by what the investor community have been proving repeatedly, an instant gain on your investment is achievable by purchasing a property at a below market value price and adding value to the property via refurbishment or conversions.
If you are looking for a way to earn another form of income, property investment will do just that.
It provides an opportunity for stability when it comes to earning monthly cash flow.
Furthermore you roughly know what kind of money you can make on a monthly basis, which allows you to plan ahead on what you would like to do.
9) Income From Expertise
Just being able to build enough skills within property investment is good enough to be able to offer your expertise in sourcing property deals to fellow investors.
It doesn’t have to be buying and selling properties to earn income, but instead, it could just be helping others to build their portfolio using your experience.
10) Predictable Income From Property
Unlike other kinds of investments, there is an element of being able to predict cash flow each month/year easily.
Simply knowing how much a property could rent for in the current market is enough information to predict how much money you could be making on your investment if you managed to find a suitable tenant.
Inflation by definition is just an increase in the price of a good or service over a period of time.
House prices inflation can happen either by a change in the demand and supply equation or indirectly by an increase in interest rates on mortgages.
If demand for houses is high or there is a short supply, properties tend to be costed higher than normal.
Likewise, if interest rates are lower people are more inclined to buy at lower prices than when interest rates are higher.
Such change in the markets position gives good entry and exit points for investors to either cash in or enter the market.
12) Capital Gains Tax Advantage
Capital gains tax sits in nicely with property specifically when you consider selling the property as part of a property flip process.
First off, you can avail of the capital gains allowance that each one of us is eligible each year and secondly take advantage of the lower rate of tax on the capital gains compared to the normal rate.
13) Asset Ownership At Low Cost
The rents that you earn in most cases can be used to pay either the interest or the capital due on the mortgage each month.
This will enable you to incrementally assume ownership of the assets should you opt to pay off the mortgage from the rentals.
14) Generational Wealth
Building a portfolio of properties can act as a reliable wealth that could be passed on to your future generations with applicable taxes.
15) Building A Closed Network
Being in the property investment domain doesn’t just involve buying houses, it also involves a journey.
A journey that comprises of building a powerful network interacting with people at every step be it tenants, tradesmen, financial advisors or fellow investors in general.
Such interactions can be rewarding and provide you with valuable experiences to learn from each other.