There are plenty of options when it comes to your investing dollars. Many investors often turn to the financial markets by snapping up stocks, bonds or foreign exchange. Others prefer to invest in property. Here, there are various choices too including, residential, industrial, commercial property and more recently, co-living properties.
Clearly, there are different risks and opportunities in whatever type of financial instrument or real estate investment you choose. And a lot depends on your investment goals, risk tolerance, financial standing and amount of capital available.
In the financial markets, investing in stocks and bonds can be lucrative, provided you know how to time the market. With financial instruments, there is liquidity because they can be easily bought and sold, but there are also many elements beyond your control.
The gyrations of the stock market usually depend on the state of the economy, stock valuations and outlook for corporate earnings. Similarly, bond prices are dictated by the direction of interest rates and changes in monetary policy. To invest in financial markets, you need to keep updated on changes in monetary and fiscal policy, announcements from central banks, understand the impact of political risk, keep close tabs on the economy, monitor corporate earnings announcements and have a sense of the underlying business sentiment and consumer confidence. Many of these are external elements that is beyond our control.
That is why, when it comes to investments, property investments can offer that sense of control.
1. Stability
In general, property investment can offer relatively stable returns. It can deliver a reliable, consistent stream of passive income in the form of rental income. If you’re the type that is likely to stay in the middle of the night worrying that the stock you picked could suffer losses at the opening bell because of unexpected fall in corporate earnings, then maybe you should consider property investment instead. Real estate can offer a steady rental yield and can see you through market ups and downs. It can also act as a hedge against inflation.
2. Ability to control your purchase price
Real estate is a tangible, real asset. If you want to make money out of it, at least hold it for the medium term or beyond. There is always the potential for future appreciation with real estate but securing it at an attractive price is important so you can make capital gains in the future. The beauty of property investment is that, you can, in essence, choose your buying price. By doing your homework and analysing valuations, you can calculate what your ideal entry price would be. The next step is to then look out for below market value properties and have a great property agent with savvy negotiation skills to help you seal the deal.
3. Ability to control your tenant profile
With real estate, you can also choose the type of tenant you want to lease your unit to. Every property investor would like a great tenant who pays rent on time, takes care of your property, does not squabble with neighbouring units and is in general, an all-round nice person. The last thing you want is to deal with late rental payments or damaged property. Worse, if your tenant uses your unit for illicit activities, this could land you in trouble with the authorities. This is where a thorough tenant screening strategy can help you to steer clear of red flags and potentially problematic tenants. Choosing the right tenant will save you from losses.
4. Ability to control rent
With property investment, the asking rental price is entirely up to you. Do your sums by calculating the ideal yield that you want which can give you a decent amount which is enough to cover the your operating costs of renting out your unit, mortgage repayments with some amount leftover in cash flow. This positive cashflow goes directly into your pocket.
5. Ability to control the selling price
Just like how you can control your buying price, you can also control the selling price at which you liquidate your property investment. After accounting for mortgage repayments, work out the amount in which you would be willing to let go of your property which can make you decent capital gains. With a good valuation report, you can have a sense of the transaction prices of similar properties in your area. This comparative market analysis will help you determine an ideal selling price that is likely to attract buyers.
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