There are many who talk about investing in property. They would likely tell you how long such an investment would take or how difficult it would be, but for one seeking financial freedom, this is probably one of the best directions to go; and not only that… to be your own boss is something many strive to achieve together with the comfort and satisfaction that comes with a physical, tangible asset.
Sure, it may take time but in the long run, it does pay off. Like most endeavors, it gets easier with experience.
The benefits alone are worth going through the trouble so let’s take a look at what you stand to gain from venturing into such.
For one, there is the passive income that you could get from your rental properties. Simply put, the money you make doing nothing.
A common lie that people have always believed is that investing in property is for the wealthy only. Because of what is referred to as leverage, anyone can own property. One is able to get property with the little equity they possess and have the banks finance the rest, through a loan of course, which could be up to 95%.
This is something one cannot do by investing in shares or trading stocks. For just a little money, one is able to generate a greater return of interest through rental income for instance.
There have been studies to show that properties have had steady growth over the last 10 years but this is not guaranteed for everyone. After all, where or what property one invests are what matter the most here. However, with a steady rise and the monthly rental income one would collect in the likes of a residential or commercial property is an added bonus.
Opportunity to add value
Properties are physical assets. Therefore, one can strive to get a few properties and develop, refurbish, or makeover. This significantly increases the value for which you are free to quote your price, higher of course.
It is not necessary to sell when the value goes up. A wiser move would be to go to the bank and increase your loan for other investments.
When it comes to inflation, property investors need not worry because the increase in prices would also mean a spike in the rental income. The mortgage the investor has remains the same but they get to increase their rates based on demand for their properties or rise in value. This is a key point to take into consideration if you plan to invest.
Investing in real estate leads to multiple tax deductions. The amount of money you spend on maintaining and operational costs of your property could be deducted from the income you earn. This minimizes the amount of tax you pay overall.
There is also a lower tax rate for properties that have been held for more than a year. This is because of the long capital gains tax rates. What’s more, the government is friendly to property owners; not such a bad thing to have the authority on your side, huh!
Many invest in property for the extra money that is left after all expenses are paid. This is especially important for entrepreneurs who have very little stability with their startups at the beginning. It helps with those rainy days, and even on the good days, it is always good to have some money with you to spread around.
With the reins completely in your hand with such investments, you are responsible for your success or failure. There is less anxiety with you on the driver’s seat and your personal insight could take you a long way. Of course, this does not mean that you are an overnight expert. With experience navigating the business, there will be a payoff and more satisfyingly a personal touch.
Now we would be remiss if we failed to mention the downside or rather the challenges of property investment. Every enterprise has its fair share of drawbacks after all. The legal difficulties, for one.
There are different laws for different jurisdictions. It pays to be aware of those that apply to the area you are invested in. Commercial properties are even more complex and so depending on where one is involved, there is need for the right information.
When it comes to maintaining property or improving to have a competitive edge. This could rack up some costs making it difficult to raise the value any further and therefore almost impossible to sell.
Property taxes are also a factor to consider especially with the city one is in. This could be significant particularly in urban areas and could cut into a huge piece of your profits. Consulting with officials of the city you plan to invest in is not a bad idea in such a case.
How do you save for that first property?
While there are ways to invest in property with no money, it is important to note that with a significant down payment, you will have less monthly expenses and more money on you. There are modern ways of controlling your expenses that do not necessarily require you to deprive yourself a few changes here and there and you will not have to give up much.
Money tracking apps
These allow you to keep track of your daily expenses. Therefore, you can make adjustments and prioritize on what is necessary.
Such apps create categories of your monthly expenses and you could save a lot of money if you know exactly where the spending is.
Auto-debit your savings and bills
This is simply automating your payments; you could have a setup where your service providers auto debit payments from your bank account.
Put away part of your income
Many think this is impossible but if you get used to ignoring a percentage of your salary, you are compelled to work with what is left. When you remember why you are saving that money and have to reduce your income then it becomes even more of an incentive.
Ultimately, it is all about setting goals and really wanting to achieve those goals. Believing that all you’ve set out to do is doable and having discipline and more importantly the resilience to wait and see it become a reality, is what makes a successful property investor.