Investing in real estate has become an increasingly popular way for individuals to invest their money and ranks among the most common investment vehicles alongside shares, bonds and cash savings. Property investment takes many forms, from property fund investment to buy-to-let.
Typically, property investments tend to be a good bet, with the value of the asset likely to increase in the long term while providing a steady income flow in the short- and medium-term. As an added benefit, the property investment journey can serve as a stepping stone to owning your own home, too.
Even though there are plenty of opportunities in the real estate market for buyers to make big gains, there is a lot more to purchasing and owning property than investing in stocks. Investors require a significant portion of a property’s value as a deposit (as much as 20 percent in some instances) and likely have to be credit-worthy enough to qualify for a mortgage. Investors also require cash to cover some of the costs associated with buying, not to mention cover other costs such as stamp duty. Once the home is purchased, chances are the investor will want to hire a lettings agent to source tenants and probably even manage the home on the owner’s behalf, which are further expenses that have to be catered for.
If this all seems too much, there’s some good news. There are a number of ways of investing in property and being successful at it. Ali Seytanpir – an active member and content follower of many national property associations – is among many investors who understand the real estate market, with his knowledge stemming from research that he shares with the entire community.
Before jumping into the real estate investment scene, it’s important to consider all potential benefits and risks. Remember that property tends to be long-term and if there’s any potential for good returns, the investor has to put themselves in a position where they are never forced to sell. Do your homework before committing, and possibly talk to various experts and learn more about the process.
Consider Property Investment Funds
Investors can consider putting their money into property investment funds, which provide them with an opportunity to invest in commercial real estate without being responsible for the actual property. However, investors new to the real estate scene should do their research first, especially when it comes to property funds, which are unit trusts invested in property.
Like unit trusts, an investor’s cash is pooled with that of other investors. An individual will be required to purchase shares or units in the investment, with the costs changing on a daily basis depending on the fund’s performance. A fund manager is responsible for the investment of the pooled funds in ways that bring the best returns, whether it’s rental income or by earning interest on the money.
Investors have to pay for their investment to be managed professionally, with charges typically ranging from 1% to 1.5% every year. Dividends realised from the fund, as well any capital gains, are considered taxable income, so an investor has to factor these costs. The property stock can also be based solely in the UK or spread across the continent or other locations around the world.
Begin at Home
Individuals nearing retirement age who are probably living in a house with too much space for their needs can consider breaking it up into a number of units. They can keep the ground-floor flat for their living purposes and use the rest as the first units of their property investment portfolio. It makes good financial sense to let go of some equity from the property, and the homeowner can oversee the management of the newly created units.