Many people consider Real Estate investment a safe choice, but it’s also an expensive way to invest. What are the benefits and disadvantages of property investment?
To consider investing in property, you need to have to have a relatively high net-worth as the cost of a single property can be quite high. For example, in Vietnam, a country which many perceive as being characterized as low income, a new 2 bedroom apartment can cost more than 200 000 USD.
After you have found the right property in the right location, you still need to buy insurance to protect against something happening to your property. This is extremely important. If your property burns down, or is affected by a natural disaster, it could become worthless. You also have to factor in the costs of running the property and management fees, taxes, commission to real estate agents and finding a tenant.
The Value of Real Estate Will Increase Over Time
An investment property will retain its value and appreciate over time, but remember, it’s still a long-term process. We’re talking 20 - 30 years in the future, so it’s not something you can collect some quick profits on.
Why is it important to invest in property?
The rational investor should ensure a reasonable spread of risk in their portfolio. By spreading your investments over a variety of asset types, the investor achieves a lower risk, and in most cases, a higher return.
Tax Benefits and Higher Security against Inflation
Real estate has the advantage that it has a low correlation with the stock market. This means that properties do not necessarily fall in value when stocks fall. This is significant in the longer-term, as it means that real estate lowers the risk in your wealth portfolio without lowering your expected return.
In addition, there is a particularly low tax on housing returns - in the vast majority of cases, zero percent. This increases the likelihood of a good return compared to bonds and shares that are taxed at higher rates.
We can conclude that a real estate investment is important to consider in your portfolio, however, you still need to spread your wealth across multiple asset classes, so that you do not dig your own grave in case the market crashes.
If you are thinking about investing in real estate and want our professional opinion, you are welcome to contact us
and let us help you to find the best solution.
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