Technically, investment property can be understood in the terms of buying any property with the intent of gaining return. This investment property can be any type of venture like vacant land, apartment buildings, duplex or single family homes and even any type of commercial property.
The “investment property” actually is termed to the property, which the owner does not occupy or occupies only the half part. Consider these points as well regarding investment property:
1) The concept of possessing investment property is increasing among people since it carries a percentage of surety in terms of its returns (return on investment or ROI). Mostly people opt for land as an investment property for reducing their taxes because this is an assured way of income that can be given on lease or even sold at high prices later when the market prices bear high rates. Apart from this, investment property can also be bought from auctions and even be inherited. Many also invest in a property for securing their financial life after retirement.
2) Many beginners follow the strategy of buying a duplex, staying in one part and the other part is given on the rental. This helps in paying off the loans while the excess money collected becomes a profit for the owner. In this way, the owner can then purchase another investment property and the cycle continues. The fact is that the investment property is usually purchased mainly for gaining income by renting the property, profiting by overtime from appreciation, and for selling it latter at higher prices.
3) Investment property is one of the most popular mediums to secure out financial assets. However, buying an investment property is not a child’s play. A detailed plan of action is very important to ensure that you invest is in the right direction.
What to Look for in Investment Property
Here are some guidelines that you need to keep in mind when looking for investment property. When looking for the investment property, it is very important to survey for the most profitable geographical areas that have higher in property rates and also decide upon the property-type you would like to invest in long-term
In addition, it is advisable to consult professionals; who are well versed with the practices of investment property, like investment lawyers and estate agents, and seek the help of the financial experts when buying commercial properties. Also plan a strategy of how to buy low and sell high along with your friends or spouse and solicitors to make sure that you get the best offer to on the desired investment property.
Before buying any property, it is necessary to inspect the property to note any shortcomings, as you will have to spend a bit on repairing any faults to increase the income aspects for higher rentals.
After you have bought property, make a proper taxation strategy. Your success in this matter also relies on property management and mortgage management. The “investment property” can only be termed successful if the expenses associated with the property like the loan, taxes etc, are fully funded by the income which you receive from this property in the form of rentals and if not, then you need to redesign your property strategies.
You can easily make money by investment, but at the same time you can lose as well. A proper investment will help you guarantee a better future. But the first and foremost thing before getting indulged in an investment is to identify the risks and requirements that you may face in a particular investment. You should decide your goal that has to be aimed, and also the investment that is possible at your end to help the goal get achieved.
A certified financial planner or financial advisor is always available for the investors to have their doubts cleared if they have any issues regarding investments that they are set to make. You could also go for investment management training or investment training that could help you increase your knowledge and skills in the field of investment thus helping you avoid getting to a certified financial planner all the time rather you could do the task on your own. The investment management training can include various topics like finance, human resource and marketing. There are various investment fiduciary available that could provide you investment training. Most of the investment fiduciary do not carry fiduciary responsibilities. They are just like insurance agents or stock brokers. They may hold licenses, but as they are not investment fiduciary they are more interested in selling their investment products or insurances.
While choosing an investment fiduciary, the background of the fiduciary plays an important role. You should ask following questions to the advisor you are hiring:
1) Do they have licenses and certification?
2) What degree do they have?
3) What is the experience level that they carry?
Your investment fiduciary should have good academic background and should carry a good level of experience. An investment fiduciary should have high ethical standards and should be able to provide a sophisticated advice and services to it’s costumers.
However, you can become an investment manager for your own self through proper investment management training. With investment training you could be able to take better financial decisions more efficiently and effectively. Investment management training could help you in a number of ways:
Investment training helps you manage your time more effectively so that you can focus better on the more important factors.
It helps you delegate the workload depending upon the situation.
It helps you manage your resources such as financial goods or other equipment properly.
The investment manager who has done investment training is in charge of determining the total amount of short-term and long-term capital. This is done with proper planning of finance and investment. Investment fiduciary allows you to invest your money in assets and projects and make profit from it.
Investment training is concerned with the management of assets, valuation of firms, allocation of capital, etc. Besides this investment management training allows you to evaluate the financial performance, financial institutions, supply of funds to other companies, negotiate with bankers, behavior of stock price, interact with bankers, and keep track of quotations of stock market.
It is hard to imagine if anyone is living without money and it is equally hard to imagine if humans are living without investing in someway or the other. In plain language, investment means the act of investing or laying out money or capital in an enterprise with the expectation of profit. But at the same time the term investment also means money that is invested with an expectation of profit.
Investment is closely related with earning money and employing it to earn more by its virtue of its inherent multiplication factor. It is this character of money (read investment) which drives people invest in various asset types in which they are comfortable with. As a general rule, it is not quite natural for the novice investors to pursue high return investment categories as they perceive the high element of associated risk is beyond their control.
The Big Question: Could You Do Without Investment?
The answer is rather simple as everyone from top down has wanted to invest in one asset or the other. The more conventional the asset type is more the investors and thus investment. Let me detail this out for you.
Traditional investments like investment on gold and land have never let down the investors although rate at which they appreciated was below par till recently. But come to think of it; the simplicity of prediction matrix and non volatile nature of their class made them the darlings of one and all.
Current Investment Scenario
The current investment arena is extremely wide and intricately interdependent. The simplest investment by far, the savings account, contributes to the pool which bank draws from, for advancing loans to a variety investors. Thus the return on your investment (savings) is connected to the return the bank expects. Floating rate of interest is one of the manifestations of this interdependence.
Investment Options for You
It is impractical to attempt to list out all investment types. However the following are the representative types which apply to all economies.
1. Investment on stocks and securities
2. Investment in money market instruments
3. Investment in mutual funds
4. Investment in ventures
5. Investment in insurance
It is difficult to foretell how and why people make investment decisions. Also it is not true that investors play safe every time. Speculating a higher than usual and short term profit is none too unusual tendency with some. Such an investment type is classified as speculative investment. Although it beats logic, it goes by gut feeling of investors. Many stock investment and real estate speculators have made big time money taking tremendous risk.
The word Investment is very commonly used nowadays. But to understand it accurately you should know that Investment is an act or contract that obtains or increases enduring economic links with an existing institution or one that has to be formed.
Everyone knows that in todays era Investment is important. But, how do you know the correct Investment moves that could be right for your personal needs and goals.
The concept of Investment
A good Investment can be a well-coordinated suit and sports jacket for some or may be buying a piece of land or may mean anything to any person. But Investment is a term with several closely related meanings in finance and economics, related to saving or deferring consumption.
An asset is typically purchased, or similarly a deposit is made in a bank, in hopes of getting a future return or interest from it. Literally, the word Investment means the action of putting something in to somewhere else.
The most important exception for the purpose of investment is the acquisition of interest in land, which is governed by both statutory and customary law. The judiciary that comprises both the lower courts and the superior court.
The major difference within the use of the term investment in economics and finance is that economists are known usually as referring to a real Investment. Case in point a machine or a house but financial economists typically refer to a financial asset money that is put into a bank or the market which can then be new to buy a real asset.
The world of Investment can seem to be mind-boggling for a beginning investor and the amount of information required to be consumed can appear daunting. So how does one decide what kind of security to invest in?
Considering the point, would you choose stocks, bonds or some combination of investments? Or could you invest in mutual funds? How do you choose a particular fund, stock or bond? How do you assess the risk to your money? Well! Seems confusing right.
Undoubtedly, the most commonly new Investment service is buying and selling stocks. Since only licensed brokers are allowed to trade stocks, an individual who wants to buy or sell a stock is required to work through a broker.
Individual brokers work for financial services companies known as brokerage houses. In general for Investment purposes, there are two main types of brokerages, the most commonly known full service broker and the more recently developed discount broker.
Since prices of things are rising, doesn’t it make sense to enjoy now rather than save and consume later when we will obtain less for the same money?
Yes, if we are going to keep money under the carpet.
No, if we are going to do proper Investment and the rate of interest is higher than inflation rate. So if inflation is 5% and we obtain 8% return, the money successfully grows 3%. Hence a year later, we will enjoy more than what we would enjoy in most cases, if you or someone that understands and has expert knowledge spent now.
This is the concept of delayed gratification a type of Investment thought of for the future.
Usually taxes are the biggest expense. But you could also watch out for loads in mutual funds, any fee you pay to your Investment advisor, subscription to Investment magazines, demat your Investment account charges.
In most cases, if you or someone that understands and has expert knowledge are investing one lakh a year and its most important to understand if you are paying 5000 as a fee to your advisor and its much more important to understand if you are successfully paying 5% entry load, your chances of this portfolio beating a well diversified AAP, compliant portfolio over the long term is almost nil.
What could you prefer: Rs 10,000 right now or Rs 10,000 five years from now?
Common sense tells us that we could take Rs 10,000 today because we know that there is a sure time value of money. The Rs 10,000 received now provides us with a better chance to put it to work immediately and earn a sure return on it.
A single rupee today is worth more than a single rupee Investment a few years down the line. Given this, households that have surplus funds highlight within the form of savings want to have Investment in those funds so that the value of the funds over the years does not go down.
There are various forms of Investment at the availability of people. These include real assets like a house, an auto, a television, or financial assets like stocks in companies, bonds, units of funds, et cetera.
Traditionally, term deposits in banks, post office savings schemes, bonds and common stocks are the most accessible forms of Investment available to the investors. Term deposits, post office savings schemes and bonds give a fixed return over a period of time.
Investors would usually want their Investment in an asset, which gives them maximum return on their Investment. However, life is not as simple as that. Different assets come with different risk profiles. So choose correctly.
If you tell people that you play the market, they’re likely to respond in one of two ways – either they want you to give them investment advice, or they think that they’re experts and they want to give you investment advice.
Today, investment advice is everywhere, but investors should beware – free investment advice is usually worth exactly what you pay for it – nothing!
Using a Stock Broker for Investment Advice
All too often, stock brokers are trained salespeople, more so than trained financial professionals. Before you act on any investment advice from a stock broker, make sure you understand how the broker is paid. Do you pay him a fee specifically to give you investment advice?
If so, does he have any other incentives to advise you to buy a certain stock or financial product? Stock brokers are legally required to disclose any conflicts of interest when giving investment advice, so make sure you ask.
Or, if you’re not paying your broker specifically for investment advice, you need to ask him if he receives a higher commission from the product he’s recommending you buy than from other, comparable products.
Using CNBC for Investment Advice
CNBC is a 24-hour business news channel, and throughout the course of day, dozens of stock market pundits appear on screen to give investment advice. To disclose all possible conflicts of interest, CNBC displays an on-screen graphic detailing if the pundit owns any of the investments he’s advising you buy, or if his family or firm do.
However, the biggest risk in using CNBC for recommendations is that much of the investment advice is distilled into minute sound bytes. This results in an incomplete picture, in which you may not fully understand the pros and cons of a given stock or other investment vehicle.
Using Magazines for Investment Advice
There are numerous magazines that dispense investment advice. The best among them are probably SmartMoney and Forbes.
SmartMoney is geared towards somewhat less sophisticated investors, however, Wall Street pros can read and enjoy the publication without it insulting their intelligence. The good news is that SmartMoney offers in-depth profiles of many stocks and other investments in each issue.
It is also faithfully honest about its best and worst picks, and it routinely reviews how its investment selections have performed over the past year.
Forbes is slightly different type of publication, with a somewhat more affluent and conservative audience. While SmartMoney is geared towards upper middle class investors with a few hundred grand in their 401k’s, Forbes is more for the executive-level investor with a few hundred grand in annual contributions to the Republican Party.
This does not mean, however, that Forbes is not a good publication. It does devote a full 1/3 of its pages to investment advice, and while its investments articles are not as in-depth as SmartMoney’s, they are well-written and concise – and sometimes that’s just as good.
Using the Internet for Investment Advice
There are numerous online sources of investment advice. Yahoo! Finance publishes articles and relays analyst opinion. TheStreet.com has many premium products that give comprehensive recommendations. But easily the most famous website for investment advice is MorningStar (morningstar.com).
MorningStar is best known for its mutual fund reviews, but it also publishes research reports on individual stocks. However, MorningStar has come under increased pressure lately as many of its picks have failed to pan out.
MorningStar assigns stocks ratings of one to five stars, and critics charge that the company will give a bad stock a good rating, and then as the share price falls, MorningStar upgrades the stock – saying it’s fallen too far and is now a great bargain.
The problem? The stock sometimes continues to fall. In the case of certain stocks like Microsoft (MSFT) and eBay (EBAY), MorningStar may soon have to create a sixth star to give them as they continue to plummet in value.
The message is – beware of all investment advice. Get your recommendations from multiple sources, always check the advisor’s track record, and be wary of any potential conflicts of interest. And the next time your brother-in-law tries to give you some investment advice, refer back to the first paragraph of this article.