If you have a family and you want to improve your financial situation, there are a few things you can do. If you have some spare cash now, and you’re willing to play the long game, one thing that could potentially help you to live a better quality of life in the long run is investing in property.
Is Investing In Property A Smart Move For Your Family?
However, investing in property is not a decision that should be taken lightly, and you need to be sure that it’s the right move for your family before you go ahead. Below we’ll discuss some of the pointers you’ll want to bear in mind as you consider this course of action.
How You Could Make Money From Investing In Property
When you decide to invest in property, there are two ways you can make a return. You could earn an income by renting out the property you have purchased to tenants, or you could buy a property and later sell it for a higher price. You might decide to invest in an alam impian house, for example, before later selling it on for more money.
Even if you don’t want to directly go out and buy a property, you can make money indirectly investing in a fund that invests in property.
What Are The Risks Of Investing In Property?
There are many risks associated with investing in property, which is why you need to be sure that this is the right decision for your family. Property prices and demand for rentals can go up and down, so making an investment in property is something you have to be willing to stick to for the long term.
If you are willing to stick it out, you should be able to ride out the losses in a slow market and earn a profit when times are better again. However, if most of your money is tied up in property, it could cause issues when housing markets are slow. This is why many professionals recommend diversifying your investment portfolio.
Investing in property can be a good choice providing you’re in it for the long haul, and providing you’re not going to tye all of your money up in property investments. It’s a good idea to make other investments.
Here’s a quick run down of some of the risks of investing in property:
- Money tied up in property – it can take a long time to sell property, unlike when investing in shares or bonds.
- It’s a big commitment
- There are buying and selling costs – you have things like estate agent and surveyor fees, stamp duty, land tax, solicitors’ and conveyancing fees to consider.
- Demanding – investing in property means also committing to maintenance work and managing the property, which takes up more time and money.
- There isn’t a guarantee that you’ll earn enough money to cover your loan repayments
- The cost of your mortgage may rise
- If you fail to keep up with repayments, the bank or building society may take the property from you
Tips To Invest In Property
- Don’t over-leverage – it’s best not to use more than a 50% mortgage to purchase your property. Remortgaging may not be the best idea.
- Avoid shared mortgages – you may be able to borrow a higher rate, but they require one person to be the main borrower and one person to borrow less. The person with the higher income will be the main borrower even if they have a lower credit rating. This means interest rates could be higher.
- Start small – if you feel this is a risky move at the start of your portfolio, you could invest in a Real Estate Investment Trust or fund instead.
- Review your plan regularly – keep notes of the process and plan ahead around 6 months in advance. Know how changing mortgage rates will impact you, and how it will affect you when property prices rise/fall.
- Invest overseas – foreign currencies and markets may be a better idea than the domestic property market. However, the research beforehand will be time consuming. Consider the economy and the political stability of the country.
- Bargain – finding out about a private seller’s personal circumstances could help you to bargain with them.
- Have an exit strategy – timing is crucial, so you need to keep an eye on the market and know if you ever need to pull out. Having an exit strategy before you get started will help you when it’s time to get out.
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