3 Ways to Invest Your Savings In the Property Market

By on April 24, 2020
Property Market

There is no denying that property investment is one of the most popular forms of investment. This has long been the case. Property market investment is attractive because it is a long-term investment, and it is one of the most stable options as well. Plus, if you play your cards right, you could end up with a lovely villa whereby you can spend your summer holidays when your property is not being rented out. In recent times, luxury villas Marbella for sale have become very popular, fitting perfectly into this investment notion. Nevertheless, there are different approaches you can take when it comes to investing your savings into real estate. Therefore, read on to discover more about three of the best options.

Real Estate Investment Trusts (REITs)

If you want portfolio exposure to real estate, yet you don’t want a traditional real estate transaction, you may want to consider going down this route. A real estate investment trust is generated when a trust or corporation uses an investor’s money in order to buy income properties and operate them. REITs are purchased and sold on major exchanges, as is the case with any other stock is. Trust has to pay out 90 percent of its profits that are taxable in the form of dividends to maintain its REIT status. 

Through doing this, a real estate investment trust is not going to need to pay corporate income tax. However, a regular business would have to pay tax on the profits, and then they would need to determine whether or not to distribute its after-tax profits as dividends. 

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In terms of the benefits of this option, real estate investment trusts are essentially stocks that pay dividends whose core holdings consist of commercial real estate properties that have leases that produce cash over the long-term. On the flip side, though, you’re investing in stocks, rather than a typical real estate transaction, and so you’re not going to get the leverage that you would get with traditional rental real estate. 

House flipping

Another option when it comes to real estate investment is house flipping. With this approach, you are going to look to sell an undervalued property for a profit, and you will do this with speed. Usually, the house is ‘flipped’ within a period of around six months. 

This is suitable for people who have a considerable amount of experience in renovation, as well as real estate marketing and valuation. In order to get started, you will need the ability and the capital to oversee or do repairs whenever they are needed.

In terms of the pros of house flipping, this is an investment with a shorter time frame in terms of your capital and effort being tied up in a property. There can be significant returns as well, depending on the market conditions, and you can experience these returns in a fairly quick time frame as well. 

There are some negatives that you will need to consider as well. You are going to need to have deep market knowledge in order to trade real estate in this way. Hot markets can cool quickly and unexpectedly. This can leave you with long-term headaches and short-term losses. You need to be prepared for this. 

Become a landlord

Last but not least, you may decide to invest your savings into the property market by becoming a landlord. This is the most popular option when it comes to property investment. 

There are many different ways you can go about this as well. You may decide to invest in a rental property near your home so that you can manage the property with ease. Another option is to buy a holiday home overseas and to rent the property out during the months that you’re not visiting. This means that you have a luxurious second home, which will make income for you whenever it is not in use. Plus, in a lot of locations, you can command high weekly rents during peak season, so there really is the opportunity to make your profits soar by going down this route.

This is ideal for people that have renovation and DIY skills, as well as those who have the patience to manage tenants. You will need a good chunk of capital to get started, as you will need to cover vacant months and finance up-front maintenance costs. Don’t forget, though, that there are property management companies should you want someone else to manage this for you.

There are a lot of benefits that are associated with going for this option. This includes the fact that regular income is provided through rental properties while you can also maximize your available capital through leverage. Furthermore, a lot of the associated expenses can be deducted from the tax you pay, and you can use the losses to offset gains in other investments that you may have. In a perfect scenario, properties will appreciate over the course of your mortgage, which means you end up with a more valuable asset than what you started off with.

There are some drawbacks that you need to be aware of as well. This includes the fact that you are going to have to deal with tenant management. A lot of landlords have experienced headaches with tenants, especially when it comes to late payments or causing damage to their properties. Nevertheless, with an effective tenant screening process, you should be able to reduce the chances of this happening considerably. 

So there you have it: three of the different ways that you can invest your savings into the property market. We hope you have a better understanding of the different options that are available to you, as well as the pros and cons that are associated with them. There is no right or wrong answer when it comes to investing your savings into the property market. It is all about figuring out what is going to be right for your specific situation.

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3 Ways to Invest Your Savings In the Property Market