Risk Reduction in Property Investment Advertisements for financial investments always warn you that the value of your investment may fall as well as rise.
However, with property investments and lettings, the far greater risks to your wealth are generally associated with the tenancy and its management, as opposed to a fall in property values.
If you look at any 10 year period this century there has been none which has not shown a substantial rise in property values. Buy the right property, in good condition, in the right location, and you are almost assured of a steady rise in the property’s value over the longer term.
The steady rise in capital values, added to your annual rental income, can give you an incredibly good total return which is the equal of or better than some of the best stock market investments.
Whereas financial investments sometimes incur high management fees, lettings incur letting agent’s fees. These fees can “cream off” the difference between an incredible investment return and a mediocre one – unless, that is, you learn to manage the investment yourself.
Just as individuals can become experts at managing their financial investments, investing directly on the stock market, so too can landlords become proficient at managing their own properties.
Whether you decide to manage your property investments yourself or you use the services of a good (qualified) letting agent, you should find that property is as good as any other investment medium and better than most. Unlike many other investments, such as pensions and managed funds, with property you are in total control.
As a successful private landlord you will maximise your returns if you can:
- Manage the tenancies yourself
- Use DIY skills to carry out some of the maintenance and repair work – this tends to be expensive and can make a severe dent in your returns.
This does not mean, though, that you cannot make a good return using agents and paying others to do repairs – many landlords have no choice in this as they live too far away from their properties to be personally involved.