Five Reasons to Have a Long-Term View to Property Investing
While there are several investment options for individuals to multiply their income and wealth, nothing comes close to real estate or property. Property is regarded as one of the safest and best investment markets across the world, but, did you know that the ideal way to view many relationships with real estate is as a long-term wealth creation strategy?
Anyone who has lived through the cyclical market knows that investment timeframe can ultimately influence the potential of a real estate investment. In fact, property investing is not a ‘get-rich-quick scheme’ and short-term gains from property investments are rare. In other words, time poor individuals, with a long-term view are better placed to harness the benefits of property investing.
In this backdrop, let us discuss some intriguing reasons which support why investing in real estate is a long-term benefit solution:
1. Reduce risk
An investor seeking to make a quick profit from real estate investment usually experiences greater anxiety and stress levels, and greater risks. However, long-term investors face lower pressure and lower stress as they are less bothered by quick turnarounds and hands on approach. In fact, the practice of long-term investing helps investors to enjoy many benefits
While long-term property investing can minimize risks, not all investors are lucky enough to fetch the desired returns from real estate investment. Only those investors who exercise sufficient diligence and prudence before investing tend to benefit from low volatility over the long run.
2. Helps to tackle inflation
Inflation is considered as a silent, slow killer that steadily erodes the value of an individual’s money, and in turn the value of their accumulated savings. Thus, it is very important for an individual to beat inflation to protect their wealth from erosion. Real estate is believed to be one of the best hedges against inflation, which actually can perform better during times of rising consumer prices.
Increasing population growth and limited availability of land tend to increase housing demand and property prices over time while assisting toward allowing investors to preserve the buying power of their money.
3. Builds wealth via compounding
If individuals are investing in property for capital growth, they can benefit more the longer they hold the property, provided the value of property increases over time. Investors receive a nice boost to their net worth over time through increases in property values.
The longer an asset is compounding, the more it can grow. This is because compounding creates a snowball effect that grows exponentially as time passes. To better reap the rewards of compounding, investors should seek properties in a location where demand is likely to surge in the future, pushing up both capital growth and rents.
4. Allows to escape property bubbles
When investing for the long run in the property market, investors are more focused on long-term income streams rather than short-term price movements and capital appreciation. Meanwhile, individuals with this approach are less likely to fall prey to real estate bubbles.
All in all, investors should focus on properties that are well-positioned to grow in value over time, while keeping in mind that there can be troughs and peaks along the way. It is equally important for investors to ensure that their investment property fits into their immediate life and financial goals as well as those into the future.
CEO Australian Property Advisory Group
Mr. Kunal Sawhney
CEO, Kalkine Group