Why you should buy an investment property?

Posted on January 16, 2019

Let’s face it. People are scared now, more than ever, to invest in property – and with good reason. The real estate market has seen a lot of realtors get burned in the previous volatile economy. With such a large investment needed to buy property, buying and selling houses has been a largely difficult feat.

However, there is hope. The market is starting to bounce back and is beginning to balance out again. Unlike during the past years where we’ve seen unpredictability and vulnerability to slight market pressures, we are seeing a real estate market that is starting to stabilize.

Everyone should give it a go if they’re truly interested. Real estate is generally an excellent investment option and can generate, good, long term, passive income for you. There are a lot of sexy aspects to it, like being able to triple your investment, and there are some dark aspects to it too, like encountering difficulties in selling.

Buying an investment property is just one strategy to growing your investment portfolio and building wealth. If you play it out carefully, buying an investment property could be a very lucrative decision for you. You can add it to your other wealth building strategies if you’re also into stocks and bonds and diversifying your holdings.

If you’re seriously interested in buying an investment property and just need a slight push towards the right direction, you’ve come to the right place. Here are some reasons you should buy an investment property.

1. It might be easier than you think
Sure, there is a ton of paperwork to fill out initially, and a hundred thousand copies of documents to produce before you can secure a property (okay, exaggerating but you do get the idea) but other than that, there are no complicated steps to take. Once you have the funds and finances sorted out, the rest can as easy (or as hard) for you depending on how well you do your homework. Applying due diligence in researching the right property and getting it correctly inspected and evaluated could mean ownership for you in no time. As with any investment strategy, you have to be sure you’ve covered all your bases first by doing careful research. The key words are “careful research”. Spend time doing it.

2. Easy to understand
Unlike the share market with its complicated, technical terminologies and 60-page prospectus, the property market is a relatively easy asset to understand. The basic strategies are simple and easy to understand and wrap your head around as well. Concepts like capital growth, cash flow, and yields are some of the terms that you need to wrap your head around, and they’re not that hard. Probably, the most complicated aspect is understanding the mortgage where you have to learn how different loan types work. A good broker or property manager can help with this. But the rest of the strategies are simple- and simple strategies are those that are proven to work.

3. You control your investment
Investing in a property is not like investing in other types of investment like shares. With property investments, you have full control over where to buy, how to buy, and where to sell. In the share market, for example, there are a lot of ‘moving parts” that can influence the value of your investment. Things like politics, emotions, or even news can have different degrees of impact on share value.

4. If you value stability, investment properties might be the way to go
These are uncertain times and every investment is a volatile investment. That said, the property investment market is still less volatile than stocks or mutual funds. The share market offers no guarantees. You won’t be able to predict the value of your shares in 5, 15, or 25 years. Share markets could change within minutes and if the company you invested in crashes and stocks go down in flames, you lose 100% of your investment. However, in the property investment market, even if your property declined by 50% over the next 25 years, your steady investment could still have doubled within that time. You can foresee the movement of the property market in 12 or 24-month increments and still have an idea about how well it will perform by gauging which direction market pressure will be pushing it.

Do you fear price drops? If you think about it, these are not real losses unless you actually sell the property instead of renting it out. If the property generates good cash flow, you can sustain your investment property until the price recovers from the drop.

5. It pays itself off with a little help from your “friends”
By friends, I mean accountants and tenants. Worried about a mortgage? Your tenants will be paying down your mortgage as you sit back and relax while watching your investment property grow in value. Worried about other fees? You can have deductible expenses claimed legally with the help of a good accountant. They can help you improve your cash flow and reduce your tax expenses by thousands of dollars if they can meticulously find deductible claims.

6. Food, shelter, clothing
Food, shelter, and clothing are three of the immediate basic needs necessary for long term physical wellbeing. These are non-negotiables and even if different agencies have different definitions of “basic” human needs, these three will always remain on that list. If you notice, shelter is on there. That means there will never come a time, in our lifetime, when people will not need housing. People always need a place to live, and they are always moving around. You won’t be surprised to find that people are willing to forego certain luxuries, like a second car or an expensive piece of tech, just to have enough money for rent or mortgage. We all need a roof over our heads.

7. More money
Fortune Magazine found that 97% of all wealth was either created or held in property. Property investment makes more millionaires than any other asset class. Here’s something to think about: off the top of your head, how many people do you know who have invested in stock market, bonds, art, jewelry, commodities, or mutual funds that have become millionaires? Now, how many do you know have become millionaires investing in real estate? Probably more, right?