Property investment can undoubtedly bring rewards, but it’s important to recognise the potential pitfalls too.
Although there are all kinds of possibilities when it comes to investing for your future, property understandably seems an attractive option for both individuals and businesses. It’s worth bearing a number of factors in mind though before taking the plunge with bricks and mortar.
First of all, there’s no guarantee of a quick profit. You may well see a good return in the long run, but it’s important to be patient. It’s also not particularly wise to see property as a way of releasing easy cash. Although it’s always possible to remortgage, it’s difficult to predict fluctuations in property prices and the ratio between loans and value. And who can forecast all the political and economic changes that might influence the price over a particular period of time or in a specific region?
Think about your objectives
One of the attractive features of property investment is the possibility of seeing an increase in capital value over time, while also receiving a rental income. You’ll need to be clear, however, over which your priority is.
If rent is your primary focus, are you confident you can attract reliable tenants in the area you’ve chosen to invest? With your mortgage and tax commitments, you’ll need to generate enough regular income to cover your outgoings and make some profit on top.
If you’re aiming for an increase in the value of the property, how well are you able to read the market? Can you be sure that demand is likely to increase in a particular geographical area?
Factors you can’t ignore
It’s sometimes easy to forget the inconvenient, yet essential, costs associated with property purchases. Surveys, solicitors’ fees and stamp duty are just the start. You also have to factor in the time involved in management and maintenance. And don’t forget that mortgage rates will inevitably fluctuate over time.
The best advice is to go into any new property venture with your eyes open. If you’re patient and prepared to invest for the long-term, then the potential for good returns is definitely there. But don’t underestimate the challenges.