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Investing in property can be lucrative, but it has its downsides…

by , 19 June 2015

Buying property as an investment is popular. You hope to see the price of the property rise in the years ahead and secure regular income from tenants.

But as with every investment, investing in property has its disadvantages. And if you're thinking about buying property as an investment, they're worth considering.

So what are these disadvantages?

Read on to find out…

When the property bubble bursts

You don’t have to look too far back to see what happens when the value of property plummets.

When the financial crisis hit in 2008, it led to a property bust of epic proportions in several countries, including Spain and the US.

Property investors who bought at the top of the market before the crisis saw the values of their assets plummet, David Thornton in Penny Sleuth explains.

Of course, investing in property can be a profitable venture and it’s easy to see why many investors put their money into property, but you can’t ignore the problems that come with it.

The costs of investing in property

You have to maintain your property and this can be costly. If you use a letting agent, you need to pay them. And the time it takes to find a tenant can mean your property lying empty for a while.

All of these costs eat into your returns. But that’s not all you have to consider.

In comparison to other assets, like stocks and bonds, property is illiquid. It can take a considerable period of time to sell your property. And if you need the funds quickly, you’ll probably have to drop your price to get a quick sale.

The lesson here is not to put money into property that you may need quickly. And don’t overburden yourself with bond repayments.

Bottom line: Property can be a great long-term investment, but it’s vital you weigh up the downsides too before buying.

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Investing in property can be lucrative, but it has its downsides…
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