The Most Important Foundation Principles for Property

apartmentThe golden component of property investment is a concept called ‘passive income.’ For most people on wages or a salary, work is all there is. I.e. except for paid holidays, no work = no pay.

Without the property investor having to daily ‘be there, at work,’ (at the building), passive income is money coming in, day-in and day-out. It’s called rent payment.

For a share market investor, passive income is also money coming in, day-in and day-out, without the share market investor having to ‘be there,’ at work. It’s called a dividend payment. There are major benefits to property ownership/investment:

  • Ownership of a tangible asset, real estate – a property with a building on it;
  • Most people can tell by inspection whether or not a property and building looks well built, well maintained and durable;
  • The idea is easy to grasp. Buy a building – get a tenant, collect the rent;
  • Generally, getting in or out of property investment is straight forward and usually without any financial losses;
  • Because it’s an easy idea to grasp, most modest-sized property investors ‘manage’ their own rentals;
  • Financial Institutions are usually keener to lend money on property than other forms of investment;
  • Tax deductions are more readily available on property than on other forms of investment;
  • While providing immediate rental income and tax deductions, real estate usually appreciates (goes up) in value.

Of course, those are a few simple points. There are also repairs and maintenance, mortgage payments, rates bills, insurance costs and so on, to consider.

Nothing is certain. Tenants may fail to pay the rent. Share markets may collapse. Buildings can be damaged. Individuals companies can have their share price shrink unexpectedly. The back-and-forth of the pros and cons of each, as passive income generators, goes on, endlessly.