Property investment has several advantages over other types of investment opportunity:
Asset Security
Property, be it commercial, residential or overseas is a tangible asset that is unlikely to lose all its value in a recession or stock market crash and so provides investors with a form of asset security.
Property Finance
Finance to purchase property can be available at lower interest rates, spread over a long term in the form of a residential or commercial mortgage. However, an initial cash deposit will usually be required by the lender.
Financial Leverage
The important principle of financial “leverage” can be applied to purchasing property. This means that once you have purchased one property, you can borrow money against the asset value to obtain a mortgage for another property, until a number of properties are acquired. This principle is often referred to as “buying property with other people’s money” and can be a very useful technique. A large number of ordinary people have used the principle of leverage extensively to create substantial property portfolios.
Knowledge
Many people already understand the basics of buying, renting, and selling property from their personal experiences in acquiring their own home.
Demand
In the UK there is a large, well established buy-to-let market, in which properties are bought to let to tenants (students, young professionals etc.) where there is good demand in large cities, university towns etc. Specialist mortgages are available for residential buy-to-let properties, and the intention is that the rents received pay for the mortgage and any running costs, with a surplus for profit. If the property increases in value over time (capital growth) they can then be sold at some point in the future for a profit.
Tangible Asset
Property is a tangible, bricks-and-mortar asset, and is versatile in that you can rent it, live in it, renovate it or redevelop it.
Design
A property can be customised to your own requirements. You can have the pleasure of seeing a property go from run-of-the-mill to an object of beauty.
Tax Efficient
A residential property can be used as your own home until you sell it, this is a useful approach as it helps to minimise capital gains tax bills, which with property can sometimes be considerable.
Holiday Home
If located in a good, sought-after area, you can use your investment property as a holiday home for part of the year, and rent it out in the times you don’t use it.