In this article in our series on ‘Alternative Investments’ we will look to cover ‘Property’ as an asset to invest into.
Property offers many opportunities as an investment from investing in a physical property where we can live, buy to let, commercial property, holiday rental property, student accommodation and also long term care units.
You can also invest into property indirectly by purchasing shares in companies involved with property development, construction or the hotel industry. For most ordinary investors we gain experience of the property market through buying our own home and perhaps as we build up wealth by also purchasing rental apartments.
Generally most of us will buy property in our country of birth or where we live and work as this is easier for us to understand and often less risky. Over the past few decades though it has become more common to buy property abroad either as a second home or for investment purposes.
Buying a property away from where you live, work or were born carries more risk as nowadays we are bombarded by articles and social media encouraging us to buy all over the world. Generally for those of us who originally come from cold climates we are enticed by the sunshine, beautiful beaches and the promise of a better and healthier lifestyle.
The reality is that generally we will do better with our property investments if we invest where we are comfortable and know the market and live in the area. Unless you are going to retire abroad holiday apartments or Villa’s which are bought as an emotional purchase rarely work out from a financial perspective and often end up losing money for investors.
AirBnB and sites like this have made the rental market appear more attractive but the reality is that governments are now biting back against people who market on these sites by increasing taxes and bringing in restrictions.
Generally the most successful property investments are ‘buy to let’ units in major cities around the world where you are pretty much guaranteed a good rental income. Over the past few decades the cost of property in busy city centers which are successful has also appreciated significantly.
If you are also able to purchase your property with a mortgage and your mortgage is nearly covered by rental income this will generally make for a very successful property investment.
Mortgages are a great way to leverage an investment and as the price increases so the value of your investment increases faster if you have bought using a mortgage. After the ‘global financial crisis’ [GFC] banks stopped lending but this is now changing although rates are comparatively higher than before the GFC. As with all investments a mortgage or leveraging can also work against you if values fall as happened in many European countries and you can potentially then lose all of your investment.
Like with any investment it pays to research it thoroughly and do your own due diligence. If you are looking to buy for holidays or retirement/second home try out the area first a few times. Speak with local people or expats who have also bought and get their views. Make sure you fully understand the legal process and the local way of buying before you commit.
The reality is if you ask many property investors who have bought abroad whether they would do the same again when it comes to a second home or holiday rental, the answer will often be no.
Ownership of a property can often mean that the little time you get in vacations to enjoy your property is eaten up visiting solicitors, banks, agents and others in helping you to run your property rather than relaxing like most people on a break!
Property is a large topic and in other articles on ‘Alternative Funds’ we will cover opportunities in Student accommodation and Long term care. Property is a key investment in a diversified portfolio of assets and the difficult part is picking the type of property investment most applicable for you as an investor. An ideal property investment will depend on your nationality, age, current earnings and attitude to risk.
The biggest mistakes when investing in property we have found over the years are when an investor is ‘led’ into buying a particular property based on emotion and pressure. This can often come when you are on holiday and have not done proper due diligence. Buying a property investment will be a major decision and is something that unless you have done your own research you should get help and advice. Ideally get help from a company or person who is not trying to sell you a property but has experience of different property markets and can help you to think through your exact requirements and how they fit in with your circumstances.
James Hartland is an ‘International Property Investor’ who over the past three decades has bought and sold and been involved in multiple property transactions in the UK, Spain, Czech Republic, UAE, Philippines and other markets.
Please do not hesitate to get in touch with us if you have any questions.