The Pros and Cons of Investing in Property
It is essential to consider the benefits and risks before investing your money in property. The more knowledge you have about investing, the lower your risk will be. Here are the pros and cons of making an investment in property.
Over time, property has been seen as a stable investment as compared to a few other markets. Though it has its ups and downs, the market as a whole tends to be less volatile than other investments such as the stock market. The reason behind this stability might be the fact that property takes a longer time to sell and is almost always in demand.
If you can leverage your investment, it means you can purchase more with less money. With property, this happens when you put down a deposit on the property, and the bank gives you the rest on loan. Leverage helps maximize your return on investment when you experience growth.
Positive Cash Flow
One of the advantages of owning an investment property is that you can rent it out. If the rent is enough to cover the mortgage, you are effectively getting someone else to purchase the property for you. When you lease it to someone, the people renting the property pay for the mortgage.
Many people prefer property as an investment over other options because it can be an excellent long-term investment. By securing your piece of land today, you can gain benefits from it in the future. With the progression in inflation, your property and its rent is likely to go up in value if you invest in the right area. Over time, your cash flow will improve as you collect more rent and your mortgage will decrease or stay the same.
While shares can be sold at a moment’s notice, it takes longer to sell a property. Varying from location to location, it could take weeks or even a few months to sell your property. This lack of liquidity can be a drawback if you need your money quickly to use it in other areas of your life.
High Entry Cost
You can buy shares for as little as $500 and invest in silver for as little as $20. However, the case with property investment is different. The property is going to cost you thousands and thousands of dollars just to get into the market. The property prices are constantly on the rise, so it is continually getting harder and harder to get into the market. This is the reason a lot of investors do not go for property investment as it is difficult to begin investing if you do not have a lot of money initially.
The property carries ongoing costs that you do not experience with other investments such as council rates, insurance costs, mortgage repayments, renovations, and maintenance. These additional expenses can be constant or come as a surprise when you least expect them.