Just like with any investment avenue, real estate has its own advantages and disadvantages. The following are three key advantages associated with investing in property.
- Property is a tangible asset (when rented out and achieved rents are higher than associated costs).
- The use of leverage provides a basis where you can achieve potentially high investment returns; whilst also spreading out the risk across a mixed investment portfolio.
- Property investments act as a good hedge against rising inflation; which is mainly derived from the fact of fixed rental income over a number of years (leases are typically between 5-25 years in length); upward only rent reviews and property values having the tendency to appreciate with time.
As shown, real estate is not a simple investment platform where investors simply bundle together and “sit and wait” for their monetary investments to ripen. It requires effective property management (see point 1); market research and thorough due diligence across each perspective property (see points 2 and 3).
Source of information:
- Dix, R. (2016). Property Investment for Beginners. Wroclaw: CreateSpace Independent Publishing Platform.
