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When it comes to investing your hard-earned money, you have a number of opportunities, including investing in property. But is an investment in property all it’s cut out to be? Have things changed in the housing market so that a bricks-and-mortar investment isn’t as reliable as it was once thought to be? It seems so, according to experts all over the world, including Ken Fisher at USA Today. Let’s explore why.
Why You Should Invest in Property
It’s true that investment in property—especially your own home—can provide an anchor in turbulent economic times. It can provide you with a firm foundation for starting and running your own business, for one thing. Further, it could be the basis for the future of your family. But it’s also a reward in many people’s minds.
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A recent survey by Betway Casino in the UK asked people what they’d do if they won a million. According to their replies, 43% would opt to buy a house first. Meanwhile, 15% would pay off their existing mortgage. To have more than half the respondents thinking so rationally about gaining so much money shows just how important the public perceives property investment to be, and how lucrative it can be.
Indeed, despite the past several years of economic volatility, housing transactions have roughly remained the same. That is, they remain at 1.2 million per year according to the Financial Times. This is despite the fact that certain areas like London have seen a considerable slowdown. Nonetheless, the housing market maintains because people understand that investment in property is the key to a solid investment strategy.
The Truth About Buy-to-Let
Some may invest in property not to make a nest egg for their future and to build a home for their family, but to flip it over, renovate it, and rent it out. Renting out property, especially in a coveted city, could provide enough to cover both your mortgages and all bills, leaving your actual salary as extra income.
Ensuring you make your mortgage payments is key, though, especially if you have another house. Making money on top of this comes easily, however, if you have been diligent with location and renovations. Plus, some costs in buy-to-let can be offset against tax. This means renting out a property becomes more like a business than a side project.
However, the downside of buy-to-let in the UK is the stamp duty attached. This could prove to be troublesome if you don’t have the capital to begin with. Buy-to-let is useful mainly for those who already have money.
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Hidden Value of Home Investment
There is another bonus to owning property that is more flexible than a buy-to-let mortgage. Moreover, it has a lower barrier to entry. Founded in 2008, Airbnb allows people to easily rent out their properties for a minimal fee.
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The scope for travel and the ability to pick up a quick room means that some people have actually made as much as $1 million in ancillary income from renting their homes or just a room, according to Forbes.
The same also goes for those with an eye for a bargain and for design. That’s because they can invest in a property to give it more value and sell it for more money. This entrepreneurship isn’t for the faint of heart, however. That’s because it requires a considerable amount of work. Plus, the risk-reward may end up only breaking even. Worse, it could result in a loss compared with the amount of work put in. But for those willing to take on the challenge, buying a house with the intention of renovating and selling it could provide another stream of income.
Is it Actually Better to Rent?
Having said this, some experts are weighing in with the opinion that it’s actually better to rent. Going against advice from wealth managers, some, including Emmie Martin, writing for CNBC, say that housing investments can be eschewed in exchange for renting. Some housing advisers argue that flipping houses and owning a house may not equate to more revenue. Moreover, if the area takes a downturn or the property is unmanageable, an investment property could even be a money pit.
The main essence of the “rent, don’t buy” advice, however, is to closely watch the market for the optimum time to buy. It may take more diligence, but remaining untethered by a house for a while might be wise. Meanwhile, you can do as much research as possible, finally landing a mortgage that’s just right for you.
The Property Market Is Changing
The housing market itself is expanding. People are looking for options such as eco-friendly housing or even smart houses. These trends are likely to change the landscape in years to come. Despite economic upheaval, young people are increasingly interested in owning their own houses and participating in the housing market.
Finally, investing in property forms the basis of financial advice from those with years of professional experience. Brick and mortar property remains one of the best investments that a person can make. Moreover, it is an investment that you can leverage for quite a lucrative sum if you work it right.