Investing In Property: Everything You Need To Know

Profitable investment is a broad net, and describes any act which involves putting money into something in the hopes of gaining a profitable return. Property is one of the most popular avenues for investors all over the world, but how do they do it?

Why invest in property?

There are two main methods for investing in property to gain profit:
- Rent – You can renovate a property and then rent it out to
- Selling for a profit – Buy a property, do it up and sell it on for a higher price

You don’t have to be directly involved in buying a property if you don’t want to. You can input money into a fund which invests in property instead. You can also invest in property maintenance and management.

Risks of property investing

With the fragile nature of the property market; prices can change all the time. You could purchase a property at the peak of the market, and watch it dip to a much lower level before you have chance to sell. If you are able to wait it out, you can watch for increases in property value and put it for sale once they rise again. Make sure you keep an eye on estate agents websites and monitor the changes.

Buying property directly

If you go down the avenue of buying a property directly, there are several risks:
- Money tied up – Investing in property isn’t like shares. You can’t just sell it quickly to free up your profits. You have to wait for months for the right buyer, legal processes and exchange of contract.
- Big commitment – It is a big risk putting all of your money into one investment.
- Demanding – Deciding to do up a property in order to sell it on will take a lot of time and commitment, as well as many weekends spent painting walls and fitting carpets.

Using a Mortgage to Buy Property

There are many risks of using a mortgage to purchase a property:
- You can’t ensure you will earn enough from renting to pay of the loan amount
- The cost of the mortgage might rise.
- Your property could be repossessed if you don’t keep up with the repayments

Property investment funds

If you don’t want to buy a property directly, you can add your money into a fund which will go to a professional manager. They will pool together the money from many investors and use that to purchase a property. Fund managers will charge a fee for this service so be aware of that.
These are all common examples of property funds:
- Real estate investment trusts (REITs)
- Shares in listed property companies
- Property investment trusts
- Offshore property companies
- Insurance company property funds

Before investing in property

Before you go gung-ho and jump into investing in property, do your research. Take advice from friends and family, as well as asking your financial adviser the best way to use your money. Once you’ve gotten the best advice, you can start looking into buying a property for profit.

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