Contents
In this article, we are going to look at some of the reasons why you should invest in an income property.
High-security value
Banks like property. It is their preferred type of security. This makes it easy to be able to get a loan to buy an income property. It is almost impossible to get a large loan if you want to invest in stocks or any other type of security. It can be equally hard to be able to get a loan to invest in a business unless you have a proven record of running companies.
Getting a loan to buy a house is a lot easier as long as you have a good credit record and enough money to pay the down payment. It is often possible to get a personal loan to pay the down payment. This means that you can invest in an income property even if you have little money to invest. There are few other investments that are open to everyone in this way. Few other types of large investments that you can make without the need for a lot of money.
Leverage
You are allowed to finance the majority of your investment in an income property as a mortgage or other type of low-interest loan. You can often finance 90% or more of your investment. This provides you with a high leverage and allows you to earn a lot of money on a small investment. You invest 10% but get to profit from 100% of the investment.
If the property increase 10% in value then you have earned 100% in your investment.
Low risk
Investing in income properties is low risk provided that you do your homework before you buy one and that you make sure not to overpay. Properties usually appreciate in value over time. Prices can fall from time to time, but this will usually not hurt you unless you want to sell your investment at that time. You can just keep the house, allow it to keep paying for itself and then sell it when prices have gone up again. Dips in the market is not a problem. They are an opportunity to buy more houses.
Sweat equity
Real estate is a unique type of investment in that you can invest either money or your time and work into a property to increase its value. If you have more money than time, then you can buy a suitable property in good condition and rent it out. If you have little money but a lot of time, then you can buy a cheaper fixer upper and spend your time to renovate it yourself. It is a lot cheaper but requires you to work hard. Income properties and other real estate investments allow you to convert your own time into money. The harder you work. The more you can earn.
Diversification
Investing in an income property is a great way to diversify your investments. It is possible to diversify your investment portfolio by investing in stocks, in different industries and located in different countries. You can further diversify your portfolio by investing in bonds. All your investments will despite this be invested in different types of financial instruments. Investing in an income property allow you to change this and will enable you to diversify your portfolio into the physical world.