A lot of people are on the fence about whether buying your own property is a good investment. While we won’t tackle that debate, we know that a home loan is still considered a good debt by many because homes are accepted as a good asset to invest in.
You buy a property and the idea is that over the repayment period the property’s value will appreciate so that the resale value not only covers the loan and interest, but you make a profit as well.You can also rent out your property so that the income from the rental payments pays for the property and it’s upkeep while you carry on with our life. Buying property is all about timing, and if the market is favourable, the returns are fantastic. It’s also good to have property that you can leave to your offspring, or your estate, when you pass away.
Property, like all forms of debt, has it’s downside. Buying property is an expensive exercise, and taxes and transfer costs can break the bank before you’ve even started considering a home loan. You also have to throw in maintenance, rates, water and electricity bills, any renovations etc. As pointed out, economic conditions play a big fator, especially when you want to put your property on the market and you either contend with having your property on the market for a long time or fold and sell at a much lower value than you anticipated. Property is also an illiquid asset so if you think you might need the money, you’ll might have a hard time finding a buyer fast. Location and upkeep is everything, and these two play a big role in determining whether buying a home is a worthwhile investment in the long run.
A look at investment alternatives
Depending on your motivation for buying property, there are other ways to make own assets without having to get into debt.
- Invest in listed property on the stock market: Much less risk and easy access to money. You also don’t have to worry about paying rates, transfer duty fees, finding tenants, managing the property or anything like that. As with all investments, think long term.
- Invest in the stock market: You don’t necessarily have to limit your investment to property. Buy a stake in a company, or several. The key thing to remember is you don’t want to tie up your investments in one specific share or industry. Diversify your portfolio to limit losses and ride out the (inevitable) market dips.
Whatever you do, make sure you do your research thoroughly before committing to buying property. It can work out really well for you, but if you jump into the first offer thrown at you without giving careful thought to what you’re doing, things can go awry.