property investment

How to invest in property

Property is considered a slow and stable asset. Since property behaves differently than stocks and bonds, owning it can stabilise your portfolio. Plus, there are a few different ways to profit from it.

However, it isn’t always straightforward to invest in property. There are many ways to do it, including crowdfunding platforms that let you invest in private real estate.

Keep reading and discover what you need to know to get started.

What is property investing?

“Property investing” describes investing capital in the property sector.

There are several ways of doing this, such as:

  • Buying to let
  • Property development
  • New builds
  • Real Estate Investment Trusts (REITs)

Why invest in property?

You get the benefits of any rise in value over the years when it comes to selling and it can generate a steady stream of income if you rent to tenants.

Property has a low correlation with other major asset classes. This means that when stocks are down, property is often up – and vice versa. So, if you diversify your portfolio with property, you can improve your chances of reward while reducing risk.

If you aren’t invested in other assets, then property is a great place to start. It’s typically less volatile than other asset classes. It can give you a steady income through renting. Moreover, property is always in demand. So, you will benefit from rises in value over the years by reselling it for a profit.

The risks of investing in property

Like all investments there are risks. Your investment might not perform as well as you first expected. Extra costs could reduce your profit margin to the point of loss.

Since it requires a larger commitment than other asset classes you may have to invest more of your capital and time than you first intended to.

Generally, the stabilisation effect of diversification is reciprocal. Meaning that the risks of property investment can also be smoothed over by having other asset classes in your portfolio.

Costs and responsibilities of property ownership

Property ownership requires many upfront costs, including:

  • Auction fees
  • Mortgage fees
  • Surveyor fees
  • Legal fees
  • Insurance

Additionally, ongoing fees, such as: 

  • Mortgage interest
  • Maintenance and repairs
  • Council tax
  • Rental management

As well as all of these costs, owning property comes with many responsibilities. This is especially true if you’re buying to let. Landlords need to ensure that the water supply, fire alarms, gas facilities, appliances and electrical devices are all safe for use.

Get professional advice

The above list of responsibilities isn’t exhaustive by any measure. Consult with legal advisors or trusted letting agents before becoming a landlord.

The same is true for the costs. Investing in property is a big undertaking. It’s important that you’re as well-informed as possible before making any decisions.

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