Before
Making the Property Investment
The growth potential of property investment
plus its ability to give you rental income
is appealing. But remember, a property is
a big ticket leveraged investment that can
both multiply your profits-or multiply your
losses. Do your sums carefully to ensure that
an investment in property will not adversely
affect your financial fitness.
Let us look at some critical factors that
you have to consider before making the investment.
| ~ |
Your Debt-Asset Servicing Ratio and
Debt Asset Ratio |
| ~ |
Your Cashflow |
| ~ |
Your Liquidity
Needs |
| ~ |
Measuring the
Benefits and Costs |
| ~ |
Your Investment
Strategy |
Property is an important part of an investment
portfolio for an investor seeking long term
growth. However, evaluating an investment
opportunity in isolation may lead you to become
overly7-exposed to property. This can affect
your wealth adversely during of large fluctuations
in the property market.
To attain the best possible investment
structure for yourself, ensure that your
portfolio has the full range of asset classes
i.e. cash, bonds, property and equity in
appropriate proportion. The mix and proportion
of asset classes in your investment portfolio
is critical to your wealth creation plan,
because it determines the amount of risk
you are undertaking. The appropriate portfolio
mix for you will depend on:
| ~ |
Your financial and emotional ability
to handle the risk of temporary declines
in the market |
| ~ |
Your income and
its level of stability |
| ~ |
Your liquidity
requirements |
| ~ |
Your investment
objective |
| ~ |
Your investment
time frame |
Your decision on the proportion
of each asset class in your portfolio will
account for over 90%* of the variation in
your investment returns. This astonishing
finding highlights the importance of a carefully
constructed investment portfolio based on
your individual investment objectives, rather
than choosing investments based on the preconceptions
of growth.
*Source: Ibbotson Associates, Inc.
|
