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In today’s marketplace and economy, there is a whole assortment of investment vehicles that allure investors. From company stocks to forex, bonds to mutual funds, and commodities to properties – how do you choose which to use?
When you purchase a company’s stock, your opportunities to profit come mainly from the appreciation of the stock value, and perhaps the dividend income if it is paid by the company. With forex trading, you bet on the volatile market and flipping your currencies for cash. With property investment, there are more ways to yield a better return on your investment.
So, consider property investment. Here are five good reasons why.
1. Rental Yield for Cash Flow
Just like a company stock which pays dividends, a carefully selected and managed property will provide a steady stream of income from its rental. Historically, the average percentage of rental yield returns exceeds the yield on dividends.
With property investment and rental income, the investor will have more control over the risk and return in that cash flow. Rental prices are agreed for a contracted period of time – e.g. 12 months, or 24 months, and this is readily agreed by tenants because they too, would like to know that they would be able to afford the rent for the entire duration.
When the real estate markets makes a downturn, these rental prices are locked, and most tenants will continue to rent without a decrease in rent amounts.
2. Appreciation of Property Value
Well located and managed property units also tend to appreciate in value over time. While one cannot predict that this will always happen, careful study of the future developments and ensuring that a good property developer oversees the area would help you ease this risk.
3. Ability to Create Value through Improving the Property
Unlike company stocks, bonds, and forex which are affected by macroeconomic events, you as the owner of an investment property can take simple steps to increase the value of the property you own. This is done by upgrading the appearance and functionality of the property – for example, repainting the walls, or replacing the windows with a design that is more up to date.
By keeping the design and features of the property in trend, you can ask for a better rental or selling price.
4. Using Equity Loans for Other Investments
As you pay off your mortgage for your investment home, the increase equity for the home can be used to take up equity loans if the terms are right – which you can use for investment elsewhere.
5. Ability to Find “Great Deals”
With the stock market, prices are published in the stock exchange and there is no way for you to buy “below market price”. However, for the property market, you could chance on an opportunity to purchase a unit below market price (e.g. foreclosures). This will greatly increase your net worth and give you an opportunity for a good cash flow.
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