Sep 2020

Should You Invest in Real Property?

Many investors have been looking for ways to expand their wealth through passive income. Stocks, bonds, peer to peer lending, ETFs – these are just some of the investment vehicles that investors consider. But not all of these can give you the returns that will suit your preferences.

When choosing to invest, you must understand your financial goals, as well as your risks and opportunities. Do you want a steady cash flow? Do you prefer your investment's value appreciate without too much risk? Then you might want to consider investing in real property.

So, why should you invest in real property?

Here are the six key reasons that will surely convince you why to invest in real property:


1. You Can Be Your Own Boss


When you invest in real property, you don't have to worry about another person dictating you. You can be your own boss, and you can work at your own pace. You can choose which properties you want to invest in with your money and which tenants you allow to rent to your properties. You will be the one to decide how much would you charge for the rental income. And you can manage your rental business the way you want it.

You can also choose how you want to handle your time and operations. You can manage your rental properties hands-on like the other investors, or you can get a reliable investment company that can help you with managing your properties. You can outsource the jobs that you think are beyond your specialization and ability.


2. Secures Leverage


Investing in real property secures leverage, which you can use to maximise your returns. In leveraging your investment, you can utilise it to your investment capital, mortgage financing, or time.

Leveraging your investment capital means borrowing funds to improve investment's earnings. Real property is a tangible asset, thus looking for financing won't be complicated as it is readily available. The returns that you may get on your leveraged investment is considerably favourable than to a non-leveraged one.

On the other hand, leveraging your mortgage financing is when you use your rental income to pay down your mortgage. The rental income you charge to your tenants is typically adequate to offset your mortgage. At the same time, you can cover the related expenditures of your properties.

Leveraging your time is when you choose to hand over the daily operations and management of your properties to the experts. This will give you an advantage as you can maximise your time to other things and be productive.


3. Provides Steady Income


Through rental income, your real property will provide you steady cash flow. This means that you can expect and easily forecast the amount of money coming into your pocket. You can anticipate and estimate your income every month. Unlike other investment vehicles like stocks, earnings are not always guaranteed. As long as you have tenants, the money will keep on coming to you even in the short term.


4. You’ll Gain Instantly on Your Investment


Some investors purchase a property below the market value. In most cases, they are buying cheap to sell it to the market at a higher price. There may be improvements and renovations that will cost you if ever you plan to do the same thing. But if you’re creative and you invest wisely in the right location, you will get the gain instantly upon selling the improved property.


5. Capital Appreciation


Even if the building or house in your property depreciates, the value of the land beneath it will provide you a significant increase in your wealth. This is because the land value appreciates - meaning, it will increase over time. And when the location is right and there are a lot of improvements developed within the area, the value of your property will rise even more. This is the reason why location is very crucial in choosing a place to invest.


6. Effective Hedge Against Inflation


Since the real property is a long-term investment, this passive income vehicle is the best hedge against inflation. When there is a general increase in prices - thus, inflation - you can eventually raise your rental income to the tenants. It will be very favourable to you, as you won't really get affected by the growing cost of living, since you can easily boost your cash flow.