Negatives of Property Investing
Property investment isn’t all risk free and rosy. There are potential downfalls to investing in property and any successful property investor needs to know and understand the negatives.
- Long-term Investment– Property isn’t a buy/sell short-term investment. To be a true property investor you need to be in this for the long haul. I always advise my clients to only consider property investment if they have at least a 10 year investment time period. This property is going to be part of your life for a long time.
- No trial period– Once you have entered into an agreement and contracts are signed, any change of heart will involve the whole sale process including disposal costs and legal fees.
- Relatively illiquid– Unlike shares you can’t sell property over night, it could take months for your investment to sell, so ensure you won’t be needing the money tied up in the property in an emergency and that you can financially cope with the holding costs of the property.
- Direct Responsibilities– Property managers are an essential piece of your property investment puzzle, unless you want to self manage, taking all of the responsibility into your own hands. This means you will need the knowledge and expertise to do this correctly which could become a full time job in itself.
- Costs– Costs such as land tax and capital gains tax upon sale can impact greatly on the amount of money you make out of your property investment. Knowing and understanding these costs is crucial.
- Tenants– TENANTS!!! You can’t control them. They are the most unpredictable part of your investment journey, they’ll move in, move out, may damage your property, may not pay rent. You can try to spread the risks through insurance but you can never be fully protected.
Do the negatives out way the positives for you? At Profolio we show you how to manage these negatives to ensure your property investment experience is a positive one.