Should You Try Property Investment?
In terms of property investments, there are plenty of ways to put your money into bricks and mortar. How effective are those ways, though? Are the usual approaches to this sort of speculation badly designed, and unlikely to net you a meaningful profit? Certainly, problems exist with this model of investment. For example:
1. Buying a house has extra costs. The price of the apartment block, house or other property might seem reasonable, but have you factored in stamp duty? The cost of agents and solicitors? The price of searches and surveys? Even though many of the results are meaningless to you, every cost of buying a house to live in still applies when you are buying to sell on or let.
2. Renting has extra costs. It isn’t as simple as sitting back and letting a rental income flow in. You’re a landlord now, and that means you have both responsibilities and costs. You’ll need to pay the utility bills, as well as the cost of any repairs or renovations. You’ll need to pay a management company to collect the rent. You might even have legal fees to deal with in the event of problems with a tenant.
3. It takes effort. If all of that sounds like a great deal of trouble to go to, consider what you might need to do if you’re buying somewhere to refurbish and sell on. You’ll need to find building contractors, supervise the work, pay for materials, deal with delays and cost overruns, ensure that everything is completed to the correct standard… and that’s before you even start thinking about selling.
4. Once you do, yet another set of fees from agents and solicitors hits you. Plus, there is the time and effort involved in finding a buyer, which may involve having to reduce the price you are asking for the property several times.
5. Overall, therefore, there is the potential for things to go bad very quickly. The worst part is that schemes designed to protect you from problems, such as negative gearing ones, often don’t work quite as well as they seem to. Negative gearing, in particular, only works while the market is rising, and can actually end up costing you more when conditions are poor.
All of that probably sounds like an attempt to put you off speculating in property for good. It isn’t. What it is, is a warning against putting your money into more traditional approaches without the proper thought. You are committing a great deal of money, and potentially exposing yourself to dangerous losses, so you need to be sure of what you are getting into, and whether it is the best option for you.
Other options do exist beside traditional property investment. NSW offers several opportunities to put up money in a much less active way, acting simply as the provider of finance rather than as an involved property manager. If the hidden costs and effort of other methods don’t appeal to you, you might find that to be a better option for your needs.