Property Investment – Long Term Or Short Term?
It has certainly been a rocky ride for property investors over the past few years. When you look at most types of investments, including shares, this holds true for all of them. When you’re building and maintaining an asset that provides you with dividends or rental income, watching and fretting over every dip in the market is a waste of time (unless you’re a day trader). Indeed most investment experts believe that looking at creating investment goals over a one or two year period is an unrealistic. Instead, they believe that a five or ten year plan is more in keeping with the nature of investing. They suggest that instead of speculating, investors should treat their investments as a business, with long term strategic goals in mind.
Property as an investment by its very nature is a medium to long term investment thanks to market fluctuations and issues such as capital gains tax. The beauty of holding an investment property is that, even during relatively flat periods (and according to some professionals we should be expecting the next one after 2015) rental prices tend to go up. If appropriate to your situation, you can also look into securing tax advantages through negative gearing, which helps to offset the costs of owning an investment property. Don’t forget also that eventually, if you hold the property long enough, you should reach the point at which the rent is covering or exceeds your mortgage costs and you are no longer making a loss.
Property investment for beginners should mean starting out with a sensible goal in mind – for example, are you interested in long term capital growth or going to rely on short term rental returns? With the help and advice from property experts, deciding such matters will then give you a clear way forward. Creating a proper five or even ten year plan will mean that you will be forced to be patient and become more focused on long term results and less anxious about short term dips in the market.
If you are considering entering the property market it is imperative that you find the right property that will fit with your long term plans. For example, off the plan property can be an ideal choice if you’re looking to take advantage of higher capital growth, stamp duty savings and reasonable prices. Often with an off the plan property if you’re quick you will be able to choose the best apartment in the building, ensuring you’re getting value for money. Other issues to consider include finding the right suburb to invest in – this can take months of research and analysis to find the “up and coming” areas or just to break into an already established suburb with good rental returns. Local amenities are generally the number one priority for renters, and buying an apartment that’s near schools, shopping and transport is a safe bet.
It is always a good idea to speak to an investment professional before buying a property as your first investment or considering building your property portfolio.