Many dream to own their own home!
Property has been a popular route to wealth for many. Buying their own home is often the first investment many people make; purchasing another property may well be the second even before shares and other assets.
But why choose to invest in property rather than the other growth asset like stock? While the Stock Market offers high returns, many investors have found it to be a volatile and dangerous place. This is especially true for the non-professional investor as there are many hidden external factors that can effect a financial investment. Some of the reasons in property investment are:
- capital growth
- rental income
- hedge against inflation
- greater degree of control
Sensible investments in property have many attractions. Property can be less volatile than shares though not always and it tends to be regarded as a safe haven when other assets are declining in value.
Property investment has the potential to generate capital growth (an increase in the value of your asset) as well as rental income. Putting our money in the bank or investing in fixed interest does not give us any capital growth. Even though properties increase in value over time, however, it is important to ensure that we buy property in the right location to maximize the capital growth. In the early stages, rental incomes often do not exceed outgoings on a property – particularly the costs of servicing the loan. But as the property increases in value, rents tend to rise faster than costs and the property generates net income.
Inflation is common everywhere. The rate of inflation varies according to the strength of the economy. One of the benefits of holding property is that property values increase at a greater rate than inflation. Continue reading →
