Would you still put money into property as a long-term investment or go for shares?

Asked by tammojit

2 Answers

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Answered by Richard Salter, IFA in Trowbridge, WILTSHIRE
Property I often feel is popular because it is familiar and we feel we understand it. However investing in even just one property brings its own challenges:-

i) you will need to put a very large part, or indeed all, your capital into a single building (diversification is expensive)
ii) the costs to acquire property are far higher when you consider, legal, estate agent, mortgage lender and other large costs like stamp duty
iii) you will face ongoing insurance, maintenance and other letting costs
iv) you may not be able to let your place(s) or you may have bad tenants
v) Property holdings are fairly illiquid - meaning that you may not be able to sell when you want to or even for the price you would like to achieve
vi) Any income (rent) or potential capital gains when you sell are liable to tax
vii) you need to do all the administration yourself and tax returns - or pay someone to do this for you

On the other hand as owner of a handful of properties myself - provided you have a good deposit you can use 'gearing' (someone else's money) to help improve your turnover and profits and good tenants and low mortgage costs can lead to a good steady and steadily rising (with rent reviews or tenancy changes) incomes.

By comparison investing in shares is much easier to trade in and out, easier to gain a decent spread of assets (for diversification) and involves little hands on management or reporting. Basically you get two dividends a year to account for and someone else does all the day to day running around. Like most things in life a balance you are comfortable with (and can afford) makes most sense (I have pension and other investments alongside my let properties - and my IFA earnings as putting all your eggs in one basket is seldom a good idea! Only time will ever tell which would have been the best course to have followed but few can afford to take the risk of choosing the wrong horse!

As an IFA I tend towards collective investments run for my clients by professional fund managers at the likes of Jupiter, Invesco, M&G and Schroder's which, for a modest fee gives my clients well run portfolio's which are constantly watched, monitored and adjusted as economics and opportunities present. I would recommend stating here to gain experience of markets and investment movements and then diversifying. Indeed many people do this unconsciously as this is exactly where the pension funds and investment backed ISAs you hopefully hold also invest. To buy shares direct you need a good knowledge of the companies you are buying or a good stock broker and to buy property you need bigger deposits and a clear understanding of the good and bad areas to buy in as well as whether demand is for flat or houses, furnished or unfurnished, local employers and amenities etc,etc. Location, location, location as they say.

Hope this helps
| 11.28.12 @ 18:21
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$commenter.renderDisplayableName() — {comment} | 08.23.17 @ 10:09
G
Answered by graham
Hi Volk,

I think its property investment, is good for long-term worth. Recently I have invested in
London property simply because their prices have continued to move up through the course of the year and it would not come down easily. Even though shares and property are both frequently lumped together as growth assets, each asset has distinctly different characteristics.

With shares, for instance, you can get away with only a modest outlay and you can buy and sell relatively quickly. Those are the pluses. But shares can be very volatile as was witnessed when the market slumped.

In contrast, property requires a larger outlay and buying and selling can take several months. But at least the market tends to be less volatile.
| 04.16.13 @ 12:26
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$commenter.renderDisplayableName() — {comment} | 08.23.17 @ 10:09
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Answered by

Richard Salter
Richard Salter, IFA in Trowbridge, WILTSHIRE

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