Is it Better to Invest in Residential Property or Shares?

By Sophia Rollins

Stocks and shares plus the world of trading, money markets, hedge funds, commodities, etc. may be unclear to some as how it really works, and in fact, you are sharing the same dilemma with millions and millions of people around.

Being in an unfamiliar territory, yet the importance of that knowledge to help us make choices for long term investments in our future or retirement means we should really be demanding to know more.

Financial advisers can be consulted to take us through the process of options and giving us ideas for consideration. Banks, accountants, and others can add into the mix of advice and knowledge we can glean pretty easily, that’s in addition to the basic research for free online.

There’s also a question on who we should trust, and it’s fair to ask that, as there are so many have invested after “advice” or ploughed their hard earned dollars into super funds to be hammered by fees, for minimal if any growth or actual losses.

But realise that it’s not all bad; many have and do continue to profit from non-property related investments over periods of time. We continually are bombarded by reports showing the profits investors have made by taking the risks.

So in reality, if we all get educated on the topic and find advisers we have complete faith in and know the risks, maybe it would be a better result to ignore the comfortable world of residential property, but there’s one thing people have in mind:

If they would take the risk or not.

Source: Thinkstock
Source: Thinkstock

But if you are the kind of person who needs some assurances with an investment, super fund vehicle, etc., residential property has a few key ingredients.

  • It is a tangible asset- no matter what happens to the value long term it will always be relative. For example the two-bedroom unit bought may be worth about half the value of a four-bedroom house in the same area. No matter what happens to market values over the years, that relative comparable value will be substantiated.
  • Property is never worth nothing, while companies disappear and investment funds collapse. If the property collapses literally you will still have land value!
  • Over the years no matter how bad things get financially you may have paid off a home, which you could eventually live in, if all else fails. Or of course sell and buy using its value.
  • Research is much easier to undertake as an amateur and for extra safety, consider areas you know well. Your local market knowledge will protect you from paying too much. If you wish to buy elsewhere and are unsure, you can pay a for professional valuation to make sure you do not fall at the first hurdle or even hand the search over to a reputable, licensed buyer’s agent.
  • Time is property’s saviour, almost. I say, almost, as nothing is 100 per cent assured of course. If you paid a bit too much, the market died, the home had defects, it was hard to rent out at times, stick with it! Eventually the market will bounce back, repairs will be done, tenants will pay more rent and everything can be back on track.
  • You can use leverage — here you borrow money and have a third party (tenant) pay for the loan, yet your capital growth is not just earned on your actual financial investment but on the lenders’ money too!

The article was originally posted at the Herald Sun and News.com.au.

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