Why Property Investment is such a great investment choice

The Complete Guide To Property Investment
September 22, 2020
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Why property development is such a great investment choice
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Advantages of property investment. In this article we are going to talk about the reasons why property investment is such an amazing investment choice.

However, before we begin, lets define property investment.

Property investment involves investing in purchasing a property asset to receive a consistent rate of return. In property investment no problem is solved or no value is added to property. Once you solve a problem or value to a property you are developing a property. Generally property development involves construction and property investment does not involve construction. Property investment will require some asset maintenance but it still does not make it property development.

We define property development as an economic activity which solves a problem or increases value to a fixed asset. Examples of property development include:

-buying a house and renting it out
-buying an apartment and renting it out
-buying a piece of land and leaving it to increase in value
-buying a derelict property and leaving it to increase in value

Property investment is completely different to property development. We define property development as an economic activity which solves a problem or increases value to a fixed asset. Examples of property development include:

-purchasing a decaying house and refurbishing it and selling it to a young family
-buying some agricultural land and obtaining planning permission for something that is needed in the community e.g. a school, shop or houses
-investing in a piece of land or property and building something of greater value – for example buying an old house, demolishing the house and installing twenty new apartments

We deal with property investment here and property development here and

So what are the advantages of property investment?

There are several advantages of property investment

1 – It provides a reasonable rate of return

In property investment you are NOT solving a problem or adding value to a property. The market does not really need you to buy a property and rent it out so the market will not reward you handsomely. Of course you could be rewarded for buying a property by capital growth caused by non-market forces – e.g. government tax incentives cause and increase in the demand for property as an investment option leading to higher prices

For example you buy house in a mid market neighbourhood which is very popular with students and young professionals. You rent the property out to some of these professionals or students.

The market will reward you reasonably for buying the property and renting it out.

Your rate of return will be better than what you get in a savings account but less than from investing in property development, starting a new business etc, stocks and shares

2. Time frames for profit generation are small (relative to other investment forms).

If you invest in property development you may receive a 30% return on investment within several weeks. In property investment you will receive a lower rate of return over a longer period of time. You will see an increase in the price of the property over what you paid for it but it will be over a long period.

3.Safe investment

Property and real estate are safe investments.

Of course the prices of property and real estate can go up and down but it is a fact that property prices increase over time.

This is because of inflation.

The problem with new property investors is that they get scared when the price of their property plummets and they want to sell and cut their losses.

History shows that if you hang in there your property price will rebound. Just give it time.

So what are the disadvantages of property investment?

At the property development course we pride ourselves on giving you every angle of the story. There are disadvantages of property investment

1 – Time frames for profit generation are small (relative to other investment forms).

Property investors generally make a rate of return every year.

This means that if you invest £1,000,000 in buying apartment and renting them out you will received between £50,000 and £100,000 return each year.

This is good but in property development you want to be seeing a return of £300,000 or more and within a shorter time frame than a year.

2 – You are not improving your community

Yes you are providing a place for people to live like students and young professionals.

But you are not the one providing the property. You did not buy the land and build the property.

The property was there before you came. You just bought it and are renting it out.

So there is no change to your community.

If anything, by buying this property you took a property from a first time buyer like a couple.

Also, people who rent properties short-term are simply not invested in the community. Why would they be? If you are renting in one part of the city you are less likely to care about local politics or community because you probably will end up living in another part of the city.

Charlie Standen
Charlie Standen
Charlie started out as a quantity surveyor and project manager before moving into property development and property investment. He also enjoys all aspects of writing, videography, and new media. He writes content for the property development course on property development, property investment, and property finance.