Property is generally seen as very secure investment. But are you aware that property investment can be used in some enterprising ways to achieve multiple financial goals simultaneously, at little to no cost to you as the investor? It just takes a little ingenuity to make this happen.
Very often expats see property investment as a simple purchase which will be “a good investment”. They see themselves buying a unit in the form of a house or an apartment and firmly believe that this will end up being a “the right thing”. But why? We know that there are a number of ways in which you may diversify your property investment away from just the straight purchase of a unit. In many cases there is a different reason for doing this and many expats do not understand why diversity can be a good thing.
Each methodology has its unique features. For example a real estate investment trust (REIT) is designed to generate income. However, there are sometimes too many layers of management which swallow part of the gains and leave you in a position where you could have done better. On the other hand the availability of liquidity is an attraction here with shares being bought and sold quickly.
The student accommodation route where buying direct units can get you closer to meaningful yields as well as capital gains. These are unproven in terms of the exit strategy. The secondary market is not yet fully established and so it is difficult to predict with any degree of accuracy how those who may wish to exit in the near future will benefit from capital appreciation.
Ground rents are good solid long term income generators and are excellent investment properties. Markets are hundreds of years old. For their purpose these are one of the most successful investments with long term fixed income levels and secure long term tenants income is very secure. However, in the past year capital values have increased and yields are not as high at present. This currently makes this investment slightly less attractive.
The most criticised aspect of any direct property investment is the lack of liquidity. When coupled with the fact that values can easily change whilst you are trying to sell, this often puts many investors off. However, if you plan well and decide the strategy you will follow there are advantages to property investment which actually outweigh other asset classes. This is because of gearing and the use of the asset to manage the gearing. Properly managed, the exit strategy timing does not create as much of an issue.
Start your planning today by seeing me and discussing what would suit you personally as a long term plan for the future.
Questions to the author can be directed to PFS International on 02 653 1971 or email firstname.lastname@example.org
Andrew Wood has been an expat in Asia for 35 years and is Executive Director with PFS International Consultants Co. Ltd.. He has been writing Net Worth articles for eight years and has made a significant contribution to the PFS library of financial service articles dating back over eleven years. These articles which cover the complete A-Z of financial planning are available to readers on request.
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