If I have extra money, are property investments the way to go?
property might feature in a balanced portfolio.
but in using the term balanced it doesnt mean a balanced risk but rather a balance of assets to match your profile.
for some investors (the more cautious) property might be considered too adventurous whereas for an aggressive investor it might be considered too cautious!
determining an individual's attitude to risk is a crucial stage of investment planning as it helps to determine the basis for asset allocation - which might mean allocating 0% of your investment to a particular asset class.
so without wanting to be vague, there is insufficient data to answer your point and i certainly wouldnt "advise" you in this way simply via a forum posting. having said that, i hope that this helps you decide on what steps to take next.
i would suggest a meeting with an IFA to assist you in creating a portfolio to match your investment requirements. | 01.13.11 @ 01:12
Long-term plans which include the direct ownership of a rental property or two can be very effective. The movement in property values is not directly related to the movement in share prices, so property ownership can form a valuable step in diversifying risk, where you also hold other investments.
But whether it is right for you is a more complex matter. There are four main issues:
1 If it becomes your only investment (or pretty well so) then it is an 'all your eggs in one basket' matter - so the risk is relatively high.
2 If it is purchased with a mortgage then you are vulnerable to increasing mortgage rates. If it is not let out for a period, can you afford the mortgage payments on your own? This is not a consideration with other forms of investment.
3 Might you need the cash at some time? It can take a long time to sell, unlike funds and shares, and is an 'illiquid' investment. And if you need some cash, but not all, you can't just sell a few bricks - you have to sell it all.
4 What about tax? When sold, it might give rise to a capital gain that will be taxed heavily. In other words, unlike funds, it cannot be sold gradually over a number of tax years, to take full advantage of annual allowances. | 01.13.11 @ 09:20
I've had many conversations with my clients about buying property and its not the get rich quick scheme a lot of people think it is. It is fraught with dangers, such as one of the lodgers set fire to one of my clients kitchen last week and vanished, taking several of his belongings with him causing thousands of pounds of damage in the meantime.
There is also the cost of the mortgage, tax implications, council tax, house insurance, inspection certificates, and many other points that Dr David has mentioned.
Giving you another, for instance, one of my clients had a portfolio of 5 properties. He is just an ordinary person on an average wage with a wife and 2 young kids, and decided against pension plans due to the bad press and he thought property was the way to go. Last year, he told me how 3 of the properties were empty and difficult to fill without taking a huge loss on the mortgage he has on them, thus due to the supply out in the open market. Therefore, he not only had to pay for a mortgage on his own house, but also the expenses with owning the other 3 houses. He was extremely worried and felt regret with going down this route.
I know you're probably just looking at 1 house but what I'm trying to do is explain that it's not a bed of roses, but you have to focus on the negatives as much as the positives.
Speak to me further, if you wish and I'll give you ideas of where you can place your money and if property is the route to go. | 01.17.11 @ 07:36