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The pros and cons of property investment

  • Published in FAQs

The benefits

  • Property can be less volatile than shares or other investments.

  • You can earn rental income and benefit from capital growth (if your property increases in value over time).

  • If you take out a loan to purchase an investment property, interest on the loan and most property expenses can be offset against rental income for tax purposes.

  • You are investing in something you can see and touch.


The pitfalls

  • Rental income may not cover your mortgage payments or other expenses so you may have to use other money to cover these costs.

  • An increase in interest rates will increase your repayments and decrease your disposable income.

  • There may be periods of time where you don't have a tenant and will have to cover all costs yourself.

  • You can't sell off a bedroom if you need to access some cash in a hurry.

  • If property investment is your major investment you may have little or no diversification.

  • If the value of the property goes down you could end up owing more than the property is worth. This is known as negative equity.

  • There are very high entry and exit costs such as stamp duty, legal fees and real estate agent's fees.

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