Why Invest In Property ?

How many times have we heard this question? 

I'll highlights some of the advantages of investing in property and shares with you some reasons why investing in real estate can be worth it.

The main advantages gained from investing in property are:

• Capital growth
• Rental income
• Degree of control
• Lower volatility
• Hedge against inflation
• Touch and feel it

Capital growth

Depositing your money in the bank or investing in fixed interest products does not provide you with any capital growth. If you buy property (or shares), however, you do so expecting that the property will grow in value over time.

Rental income

One of the advantages of owning investment property is that you can start to receive an income almost immediately. Once you have put a tenant into your property, you should receive a couple of months’ rent in advance upon signing the lease and then regular payments of rent into the future.

Degree of control

Without question, one of the main reasons people decide to invest in property rather than shares is that they have greater control over their asset.

For example, if they want to receive a higher rent, they can upgrade the property. If they want to increase the value of their property, they can renovate, landscape or possibly even sub-divide and create new allotments.

Lower volatility

The other main reason people will buy property instead of shares is that there is less risk in property. They understand that there is also a lower return in purchasing property but they are willing to forsake potential high returns from investing in shares for a stable return from property. They can sleep well at night knowing that the price of their property is very unlikely to plummet overnight, which can happen to the share market.

Hedge against inflation

It has been shown historically in Malaysia and all over the world that property increases at a greater rate than inflation. Periods of growth can vary but generally speaking in real terms (without inflation) property growth outstrips increases in inflation.

Touch and feel it

I have already mentioned that some of the main reasons people invest in property is that property provides them with a greater degree of control and there is lower volatility in returns and capital growth compared to other investments. When you have a chance to speak to property investors at length, somewhere in the conversation they will state that they like to invest in property because they can see it, touch it, feel it and drive past it.

For many people, investing turns out to be an emotional decision rather than one based on pure numbers and these are the sorts of emotions that make people feel better about investing in property.

I believe investors should have a diversified investment portfolio, which includes some property, some shares and some cash. The weighting of the portfolio will often be decided by the knowledge (or lack of it) in a particular asset class. If you want to earn more, you need to learn more!