Many investors make a choice on whether to invest in stocks or invest in real property. Savvy investors know that buying investment property is one investment that offers higher returns, but only if you know what to buy, where to buy and at what price to say no to! Here is an article that will help you make that decision.
Getting a Higher Return On Your Money – Real Estate and Your Asset Allocation
Rents are rising and they are rising faster than almost any other investment. In a small, older suburb of Denver, Colorado rents increased 16.2% year over year with a 95.4% occupancy rate. San Jose, California has it even better with an increase of 16.3% and a 97.3% occupancy rate according to a recent report by AxioMetrics Inc., an apartment market research firm in Dallas.
Portland, Seattle and Boston are also areas of the country that have seen the rents increase double digit year over year.
As a rental property owner myself, I am personally seeing this. I was heavily invested in the real estate market along with everyone else 10 years ago. The difference is that I never bought a property that didn’t have a Plan B. Actually, for me, everyone else’s Plan A was my Plan B. I bought for rental income, not short term gains. I did this for years and got up to about 7 duplexes at one point until the gains on the properties were such that the income became second fiddle. And, I lucked out. I started rolling the properties into ever nicer properties and then started selling them. I had sold all but one property by the top of the market in 2004.. I don’t like to think where I would be if I hadn’t sold them when I did.
Regardless, rents weren’t great back then. It was tough to find renters and when you did, raising the rent on your tenants was out of the question. Raise it and they would leave and you would be out a couple of months’ worth of rent.
Rents are great now. The reason I got into the properties in the first place was for the passive income that they generated and smart investors are doing the same thing.
Where else can you get passive income at this level? 30% down on an investment property can get you almost 8% a year on that money. The property value of the real estate market may not return for another 5 to 10 years, but at 8% a year I’m not really worried about it. Tenants won’t always be a piece of cake and you will have some turbulent times.. One tenant almost tore one of my places to pieces, but that is the price of rental ownership.
Without putting 20-30% down on individual properties and having to worry about new roofs and bad tenants you can still take advantage of these returns on rental properties. There is an easier way with REITS, or Real Estate Investment Trusts.
REITs are required to pass through most of their income to you and because they are traded on a stock exchange, they are much more liquid than regular real estate and you don’t have to pay a realtor. One more benefit is that you can individually choose cities and states. Investing in cities like Detroit right now is not a smart or strategic move.
I’m not selling any REITs and if you do decide to purchase an individual property, more power to you. What I am saying is that these high rental returns are going to be attracting more and more real estate investors, which will increase the property value which in turn may finally get us out of this real estate slump.
For more than 20 years, Julia Lundstrom, CFP has been on the front lines of investing and financial planning for individuals and businesses. You can read more about her recommendations on real estate and asset allocation by visiting http://refinedassetallocation.com or reading her blog at http://refinedassetallocation.com/blog.
Real Estate or Stocks: Which Is the Better Long Term Investment?
If you doubt that real estate is a good investment, just take a look inside the portfolios of the very rich. Nearly every wealthy dynasty in the world is grounded in property investments.
More fortunes have been made in real property than in any other investment vehicle in history. Even those who made their original fortunes in other venues are quick to protect and preserve that wealth by investing in property.
There are many reasons why property is a better investment than stocks, bonds or mutual funds.
1. The supply is limited. A company needing additional revenue can issue and sell more stock, thereby watering down the value of individual shares. Conversely, no one can issue more land. As the population of the world grows, the demand for property will certainly continue to increase, which will continue to drive up the price.
2. Real property is essential. People need homes in which to live. Businesses need factories to produce goods, and stores from which to sell. Farmers need land to grow crops and raise cattle. All of these require real estate.
3. You do not need to pay the entire purchase price up front. Property can be purchased with leverage, or borrowed money, and usually is. By law, the amount of leverage which can be used to buy stock is limited. With real property, there are no limits on the percentage of leverage you can use. Fortunes have been made by purchasing investment properties with “no money down” methods.
4. It is possible to find investment property bargains. If you want to purchase a stock, you must pay the established price for that day and time. When you decide to purchase property, it is possible to find those which are undervalued, or that you can negotiate the price you are willing to pay. This was never truer than in the current economy.
5. With property, your investment can pay for itself, and pay you too. If you purchase income producing real estate such as rental property, your tenants will be paying the mortgage for you. By carefully choosing your property, you can have positive cash flow, giving you ongoing income as well as paying all of the expenses.
6. Expenses on income-producing properties are tax deductible. You also will be able to claim a depreciation credit on the building itself.
7. You can actually control your property investment. With stocks, you are at the mercy of those who operate the company. Their actions can cause you to make or lose money. Conversely, you can implement strategies to maximize your returns on your investment property portfolio. You can make improvements that can increase the value or increase the rents.
8. Both property and stock market values can be affected by the state of the economy. However, only real property is a tangible asset that cannot be dissolved or rendered worthless by a company declaring bankruptcy.
By carefully studying the real estate market and avoiding getting caught up in the “hype” of trendy areas, an investor can almost always guarantee that his properties will appreciate in value over the years.
Buying investment property still follows all real estate guidelines. Buy the most affordable properties in the best neighborhoods as these areas will keep their value even when times are hard.
Property Investment Secrets – Look to the East!
The latest reports show that those looking to invest in overseas property should look to Eastern Europe where properties in Estonia, Turkey and Bulgaria are showing promising price-growth while much of Western Europe struggles. On top of this the pound has risen slightly against the Euro – if this trend continues it will encourage more British property investors to look to Europe for the best places to buy property.
Should I invest in property in Turkey?
Turkey has been thriving in Europe for quite some time and its real estate market is no exception. The memories of Turkey’s political and economic instability now sit firmly in the past with steady economic growth aided by clever financial policies and structural reforms put in place by the government. The country’s GDP rose to US$736 billion in 2010, increased from US$36 billion in just eight years. One of the main factors for this growth is tourism, which has enjoyed a marked increase.
But it’s not just tourism driving forward the Turkey property market; Istanbul is establishing itself as a cultural and business hub, marking itself out as the fastest-growing city last year.
Property in Istanbul is becoming more desirable, with the Global Property Guide setting Turkey apart as the most attractive property market to invest in. Turkey’s secret-status may be slipping, with the country’s clear success in the property market getting hard to hide, but with this trend looking set to continue, Turkey still offers a great place to buy investment real estate.
Should I invest in Estonian Real Estate?
Estonia is showing impressive growth while much of Europe continues to struggle from the economic recession: statistics released by the Estonian government show 8% growth in the country’s GDP in the first quarter of 2011.
Much of this economic growth is due the rise in manufacturing and exportation of goods. Furthermore the trend is likely to continue with experts predicting growth of around 5.9% in the next year. And it’s not just the Estonian economy that is showing healthy growth; the Global Property Guide stated that the price of property in Estonia’s capital, Tallinn, rose by 2.5% last year, with construction showing particularly healthy growth. With the National Tourist Board recording that British visitors to Estonia reached record numbers so far this year, Estonia is certainly looking like a promising place to put down your cash and invest.
Should I invest in property in Bulgaria?
Another eastern-European country which is showing real promise is Bulgaria, with its property market also showing healthy signs of improvement over 2011 so far. Although Bulgaria’s political past and place in Europe means it hasn’t enjoyed the investment-status that the Balkans have, this could well be about to change.
Statistics from property agencies in the country show that sales and prices are beginning to see a slow increase, with a 27% increase in sales in the first six months of 2011. This suggests that now could be a good time to invest in property before the market fully recovers, which is still being held down by unemployment and frozen wages within the country.
If you are looking to invest in Bulgarian property look to the cities, as Sofia, Bourgas, Plovdiv and Varna are showing the quickest signs of improvement, in particular Sofia which sits on the Black Sea coast and accounts for 40% of the sales in the country. Not a sure-fire winner, Bulgaria’s status is still subdued, but this could mean the perfect time to snap up a property-deal while prices stay low.
Should I invest in property abroad now?
Yes! For those looking to invest in property abroad, now is a good time with the Sterling rising against the US dollar and the Euro. At around 1.14 Euro to the sterling currently, the problems in Greece, Ireland and Italy will put further strains on the currency, but the pound is still vulnerable with interest rates staying at record lows.
Currency can make a big contribution to the success of your property investment so it’s important to keep your eye on the trading rate of Sterling, which is currently showing the best levels against the Euro for over a month.
For those looking for a hidden gem in property investment abroad, eastern Europe could hold the bargain that you’re looking for. Whether or not you want to invest in the proven-winner Turkey which is attracting attention around the world for its thriving economy and property market or riskily invest in the next-big-thing, where Bulgaria offers the value for money in a low-priced market that could significantly increase your return.
With marked improvements in their economies, and proven growth in the property market, invest now while the pound shows signs of improvement against the Euro.
Kieron Bolton, Director of Property Advice Blog invites you to visit our website to find UK Mortgage Brokers who can offer today’s Best Buy mortgage products at the lowest possible rates. You can also compare over 5000 Conveyancing Solicitors and hundreds of Home Insurance providers. By visiting our site you’ll receive a FREE copy of ‘The Essential Property Ebook” together with Free impartial property Advice for all your property and real estate needs.
Can you invest in real property without putting any money down? Buying investment property means working with other professionals to make sure that the value of the property is accurate. Profits depend on how much the property was bought and how much it sells. Beware of deals that are too good to be true!
