PROPERTY INVESTMENTS

Property Investments



Property Investments

Introduction

Despite the economic ups and downs that the world has experienced in recent times, investments in secure assets such as in real estate continue to offer the greatest and most consistent opportunities to build wealth and financial security. In the most straightforward manner, the most advantageous benefit of investment in real estate is that it is a tangible and insurable asset which provides a hedge against inflation. It is no wonder that the majority of the world's wealth is tied to this asset class.

Until the arrival of the gamut of indirect investment products, investments in real estate required substantial capital outlay. Investors took on significant risks including those associated with construction, and perhaps the biggest challenge of all, had capital tied-up in the rather illiquid asset. The array of opportunities available today address to varying degrees the key disadvantages of investing directly in property, making it possible for the average investor to take benefit of the returns peculiar to real estate (Sayce, 2006, 37).

People have to look for suitable investments that will take care of their needs later on. Such avenues as the stock market and mutual funds used to be popular, but people have become more skeptical because of past experiences (Brounen and Eichholtz, 2003, 129). The way that promises stable investment is a real estate. People constantly need places to live and work.

Real Estate Investing

Property has been considered a popular path to wealth for millions of people for many years. It has the potential to generate capital growth (an increase in the value of your asset), as well as rental income. There are also tax advantages associated with negative gearing. However, when buying an investment property, it is wise to remember that you are making a business decision and it is worth taking the time to plan.

Anyone who owes a home is already investing in real estate, in many cases, using a leveraged position, i.e. a mortgage.1 Direct investment in real estate is a strategy that involves the investor selecting and purchasing or developing (solely or in joint venture) individual real estate property them-selves. The barrier to entry through this strategy is high, the risks are generally above the acceptable limits of the average investor and the end product is an illiquid, almost indivisible asset (Nishiotis, 2004, 613). Thankfully, there are other ways to invest in this asset class.

Residential real estate has long been a favorite investment. And while many people now own shares, either directly or through their super funds, the lure of bricks and mortar remains strong, with many still aspiring to build wealth through rental properties. However, there are other forms of property investment - commercial, industrial and retail that individual investors can access through listed property trusts or managed funds. These investments offer sound diversification benefits and a better level of liquidity than is available through direct ownership of a home or unit.

Comparing shares investment and property investment

Shares are called 'liquid assets' because they can be sold quickly if ...