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What can I do with my money? |
Real Estate/Property
What is a real estate or property?
This is one asset class that many of us are familiar with. The idea is to own a home and hope it appreciates in value. For financial peace of mind, Suze Orman suggests that we should work towards owning a home that is paid off by the time we retire. This way, in old age you eliminate mortgage payments from your expenses which are likely to be a large proportion of your income. Depending on where you are located, owning a property generally requires a deposit and a mortgage which you have to pay to a provider or bank until you either sell or own the property in full.
How can I invest in property?
Why not take it one step further and own a property portfolio
Once you've purchased your first home, you can start to save up to get a second home which you can rent to start building a property portfolio. You can also invest in multiple REITs or choose multiple types of investments via a house funding intermediary such as property partner to diversify.
Via house funding intermediaries, you can invest in properties in Wales, London, Manchester, 2 bed flats, 3 bed houses, offices and more. I currently have some investments in Property Partner where I get a monthly rental income and in an REIT via my Stocks and Shares ISA.
Term
How long should you hold your property asset? This is fully dependent on your circumstance, goals and current location, if you want a physical property. My own initial aim is to own my property which I would hold for 5-10 years and then see if I can save to buy another in a different location. If I chose to sell, it will be to buy another property which I would own. Fundamentally, I want to ensure that I own at least one home by the time I reach retirement age.
Avoid remortgaging your home when you've paid in full
Although circumstances vary, once you've paid off your home, do not remortgage, as that would re-introduce a liability i.e. the mortgage expense into your finances.
How risky can this be?
Real estate investing is typically seen as less risky because if anything goes bad, the physical home can be repossessed and resold to get back the initial investment. Depending on where you live, get the right property insurance to protect your asset.
Rule of Thumb
Your property rent or mortgage should be 30% of your monthly income. If this proportion moves close to 50%, you are likely to struggle to save and meet other goals you have.
Credit Score
You'll need a good credit score in order to be eligible for a mortgage. Generally you need to be able to consistently pay off any debts, including credit card debts or bills in your name.
This is one asset class that many of us are familiar with. The idea is to own a home and hope it appreciates in value. For financial peace of mind, Suze Orman suggests that we should work towards owning a home that is paid off by the time we retire. This way, in old age you eliminate mortgage payments from your expenses which are likely to be a large proportion of your income. Depending on where you are located, owning a property generally requires a deposit and a mortgage which you have to pay to a provider or bank until you either sell or own the property in full.
How can I invest in property?
- If you want to own your own home, you should save the required deposit, build your credit score/rating and get a mortgage. In the UK, use government schemes like the H2B ISA, LISA to boost your deposit.
- If you do not want to own a property (aka virtual home ownership)
- You can invest in Real Estate Investment Trusts (REIT) via the stock martket. REIT is a company that owns properties that generate income e.g. via rent. When you buy an REIT share, you become part owner of the REIT company. REIT can also be tax advantageous.
- Invest via house crowdfunding platforms like property partner, the house crowd, property moose. These platforms allow you to invest small amounts into property purchases, gain income via monthly rents and benefit from increases in property prices which increases the value of your investment. Via this means, you own shares of the home you are invested in but not the actual home itself.
Why not take it one step further and own a property portfolio
Once you've purchased your first home, you can start to save up to get a second home which you can rent to start building a property portfolio. You can also invest in multiple REITs or choose multiple types of investments via a house funding intermediary such as property partner to diversify.
Via house funding intermediaries, you can invest in properties in Wales, London, Manchester, 2 bed flats, 3 bed houses, offices and more. I currently have some investments in Property Partner where I get a monthly rental income and in an REIT via my Stocks and Shares ISA.
Term
How long should you hold your property asset? This is fully dependent on your circumstance, goals and current location, if you want a physical property. My own initial aim is to own my property which I would hold for 5-10 years and then see if I can save to buy another in a different location. If I chose to sell, it will be to buy another property which I would own. Fundamentally, I want to ensure that I own at least one home by the time I reach retirement age.
Avoid remortgaging your home when you've paid in full
Although circumstances vary, once you've paid off your home, do not remortgage, as that would re-introduce a liability i.e. the mortgage expense into your finances.
How risky can this be?
Real estate investing is typically seen as less risky because if anything goes bad, the physical home can be repossessed and resold to get back the initial investment. Depending on where you live, get the right property insurance to protect your asset.
Rule of Thumb
Your property rent or mortgage should be 30% of your monthly income. If this proportion moves close to 50%, you are likely to struggle to save and meet other goals you have.
Credit Score
You'll need a good credit score in order to be eligible for a mortgage. Generally you need to be able to consistently pay off any debts, including credit card debts or bills in your name.
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Disclaimer
The content on WealthSquats is not Financial Advice. Consult certified financial experts to get information that is suitable to you.
The content on WealthSquats is not Financial Advice. Consult certified financial experts to get information that is suitable to you.
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