Property as an investment: opportunities, costs and risks
A property can help you build wealth, but it is not an automatic route to prosperity. An investment decision rests on more than the purchase price and the rent you might achieve: costs, financing, the work involved and the risk of losses all count. Assess the property as a concrete investment, not as a blanket promise.
Keep income and costs clearly apart
The gross rent says nothing yet about the sum that is left once the running costs are paid. Take into account expenses that cannot be passed on to the tenant, maintenance, management and possible periods of vacancy. Only then can you judge the ongoing financial viability.
Check the financing and your reserves
Work out whether you could still meet the payments if the rent fell away for a time or unexpected works came up. Where you are borrowing, look at the fixed-interest period, the repayment and the possible cost of follow-on financing. Do not treat money that is permanently tied up elsewhere as a reserve.
Value growth is not guaranteed
A later sale price depends on the property itself and on the demand that exists at that time. Location, condition and usability may turn out differently than expected. So allow for unchanged or lower proceeds as well, and for the costs of a sale.
Documents before yield claims
Ask for evidence of the actual income, the contracts it rests on and any works that are due. A property brochure (Exposé) can make the review easier, but it does not replace reading the key documents. Take larger legal, tax and structural questions to independent specialists.
A specific question about your property?