Choosing a property investment can be overwhelming, especially for a start-up business. However, this guide will help you navigate the property investment process and its importance. This guide highlights the benefits and shortcomings of property investment and also the tips for getting started in property investment for a start-up business.
Why Property Investment?
Almost everybody has made a property investment decision at one point or the other, with the hope of adding more wealth to their lives. Although, there are so many investment alternatives out there, which include cash, bonds, stocks, etc. property investment is mostly viewed as one of the easiest and safest investment options.
However, property investment is not the best decision for everyone. Therefore, before you finally conclude on property investment, it is very important for you to consider the various benefits and shortcomings of property investment.
Benefits of Property Investment
- Property Investment Offers Increasing Capital Growth: the top reason why you should consider property investment as a start-up business is because of its increasing capital growth. When you invest in property, your property will experience positive growth in value over time, and this is extremely beneficial to you financially. Aside from the steady capital growth of property investment, you would also earn income from regular monthly rentals.
- Property Investment Is a Safe Investment: property investment is the only option in the investment market that is not under the control of investors. Hence it creates a natural buffer in the investment market. Also, property investment is the most forgiving investment. For instance, if you buy the worst home in the neighbourhood, there are chances that the value of the house will still appreciate over time.
- Property Investment Allows You to Mitigate Risk: when you invest in property, you can ensure your property to mitigate risks, such as a tenant breaking the lease agreement, damaging your property or leaving against agreement; damage; fire hazard, etc.
- Anyone Can Invest in Property: unlike with other investment option, anybody can invest in property. It’s not necessary for you to know much about property investment before you go into it unlike with stocks or bonds, where you must acquire adequate knowledge about the market.
- Property Investment Give Full Control: when you invest in property, you are in full control of your investment unlike with other investments, where you need a liaison or third-party agent. With property investment, you have full control over all of your investment returns and can make all the necessary decisions.
Shortcomings of Property Investment
- Property Investment has low Liquidity: though property investment is a great and lucrative investment and you can sell off your property if you need money, the process of selling of the property investment is not as quick as the process involved in selling other investments like bonds and shares.
- Property Investment Is Associated with Hidden And On-Going Costs: Aside from the initial costs of property investment e.g. conveyance and legal fees, deposit, stamp-duty, etc. there are other hidden and on-going costs associated with property investment to consider. These include council rates, water rates, land tax, building and landlord insurance, maintenance and repairs, fitting out the property, etc. However, other investments options like bonds and shares do not have these hidden and on-going costs.
- Rent free periods: you would need to pay the mortgage repayments during the periods when you don’t have a tenant for your property and it is lying vacant.
- Property Investment May Attract Bad tenants: sometimes, you may come across problematic and bad tenants. Such tenant may damage your property, refuse to leave your property or even pay rents. All these would generate disputes, which can be very stressful and take months to be resolved.
Now that you have seen the benefits and shortcomings of property investment, here are useful tips for start-up business owners who want to get started in property investment:
- Consider the buy-to-let market in your area
- Find the best location to invest in property.
- Before sealing the lease agreement, understand the profile of your tenant i.e. residential or student?
- Decide whether to go for refurbished or off-plan properties
- Ensure that you get the highest rental yields
- Always conduct thorough due diligence.
- Contemplate a buy-to-let mortgage
- Integrate tax into your budget
- Contemplate a management strategy and time management policies.
- Look for price growth and establish an exit strategy.
Carefully observing the guides and tips above will help you to make a better property investment as a start-up business.