Which Form Of Property Investment Is Right For You?
.jpg)
There is no doubt that property is still one of the very best all-round options when it comes to investing your money. If you have the available capital, and you want to make it go further, property investment is always a good option. Of course, there is no such thing as a certain thing, and there is often a lot that you have to learn if you want to make it work. But as long as you do so, you should be able to make it work for you - and make your money go further.
But you’ll need to decide on what kind of property investment to go for. There are so many options, and so many ways of approaching this, that it is really important to research it thoroughly and consider the matter carefully. In this article, we will help you decide by looking at the main things you need to know about each of the major kinds of property investment you might be considering.
Buy-To-Let Residential Property
This is a very common kind of property investment, and one that people often want to get into because of the regularity with which you can earn from it and the potential it has for growth. With buy-to-let, you are essentially buying a property with a view to renting it out to tenants, and it’s something that can prove incredibly beneficial and quite powerful overall. So it is certainly an option worth considering.
One of the main advantages, as we have suggested already, is that you will be able to get regular rental income, and that’s a great thing to have coming in each month. You can expect long-term capital growth, and it’s a real, tangible asset that you can sell on whenever you want for instant profit. So it’s clearly something you can benefit from in a lot of different ways.
On the downside, there are certainly some hassles related to the running of a property, and especially once you have several properties to your name. You might also get unlucky and end up with void periods, where you have no tenants and are therefore not earning an income from it at all. However, that can usually be avoided by simply making sure that you are advertising well, and that you have your target tenant in mind from the start.
Similarly, you do have a certain amount of risk you need to be aware of, in the form of tenants who do not look after the place or who fail to pay rent on time. However, that can be avoided by carrying out a tenant background check, and by using a realtor to handle that side of things too.
All in all, then, it’s a great choice for those seeking steady cash flow and long-term growth in equity. But you should be ready to be a landlord, with all that this involves, if you want to make it work as well as possible.
Short-Term Rentals & Holiday Lets
This is now a very popular form of property investment, and one that has seen a real boom in recent years in particular. In one sense, it speaks for itself: it is quite simply a process of renting out a property in the short-term, and usually as holiday rentals in popular areas. A lot of people swear by this, and it’s certainly a very powerful way to invest in property, so it’s something you may well want to consider. But is it right for you and your situation?
One of the most attractive pluses of this kind of investment is that you can expect to earn a much higher rate of income compared to long-term rentals. It’s also a much more flexible option, meaning that you can still use it for personal use whenever you want, so you don’t have to rent it out all the time. And you can capitalize on tourism trends if you are paying close enough attention, to help ensure that you are making much more money through it too.
On the other hand, there is often a high turnover and management workload, and you might find that you need to put quite a lot of work in. You will however make money from that hard work, but it’s still something you need to be aware of. There may also be local regulations that restrict you at times, and you should expect the income generated to be in flux somewhat - largely owing to seasonal fluctuations in the area you have chosen. You might also have a lot of competition in very popular areas.
However, in the main, this is a great investment opportunity, and can help you to earn a significant amount of money in a short time frame. It’s great for investors in tourist-heavy areas or if you just want to have a hybrid use for your property - like a holiday home that you also rent out when you are not there. If you have such a property to your name already, it’s certainly something to consider.
Commercial Property
Of course, you don’t have to just rent out buildings to people - you can also look at the world of commercial property. Here, we are dealing with office buildings, retail units, warehouses and industrial spaces, just to name a few - really any space that could be used for any kind of commercial purpose whatsoever. For many, it’s a less attractive or compelling option than residential property, but there is a lot of potential here if you know where to look and how to approach it.
One of the main benefits of investing in commercial property is that you can generally expect a more stable income. You’ll usually have much longer-term leases, so you have less fluctuation and more certainty, which is something that a lot of investors find they really appreciate - especially if they have been dabbling in AirBnb for too long. Also, it is very much the norm for tenants to cover costs such as maintenance, meaning that you can save a lot on that as well. And in general, there are just higher yields here compared to residential properties across the board.
So there is clearly a lot to love about commercial property investment. On the downside, it’s a taller ask to be able to finance it at the start, and you’ll need significant starting capital to really make it work. As long as you have that, however, it could be a good option. But you are also going to be open to the risk of market cycles and remote work trends, which can be unpredictable and seem to be getting more so in recent years. You might also find that vacancies can last longer, so there might be times when you need to foot the bill yourself.
In a sense, investing in commercial property is a business in itself, and this is something for investors with lots of upfront capital as well as a higher risk tolerance. If you want less tenant turnover and a stronger cash flow, this could be a really good option. It is certainly one to bear in mind if you have lots of cash ready to go.
Real Estate Investment Trusts (REITs)
You may not have heard of these if you have only just started researching property investment, but the truth is that REITs can be a wonderful option for a lot of investors of different kinds and with various risk appetites. Essentially, this is about buying shares in companies that own or finance property, so you are not actually going to own any physical property yourself. Nonetheless, you’ll be able to earn from it, and there are a lot of good things about this method.
One is that there is generally a lot of liquidity - meaning you can buy and sell as you like, a bit like trading stocks. Another plus is that there is generally quite a low entry cost, and this is a form of investment for anyone who has a little less cash to start with. There are also plenty of options for diversification here, so that’s something you might want to be aware of as well.
On the downside, you don’t have any actual property to your name, so you don’t get the benefits of that itself. And you have no control or say over the property management decisions and investment decisions. Your dividend payouts will fluctuate with the market, and there is little you can do about it besides buying and selling. There is also a lower ceiling for potential growth on the whole.
However, on the whole, this is a good investment option for beginners, or for anyone who just wants an easy, relatively hands-off kind of investment in property. It has to be said that you have less hassle when you don’t actually own the property yourself.
Those are just a few options to think about if you are considering property investment, so make sure you have thought about those.
.jpg)
.jpg)
.jpg)