CAN’T SELL – RENT IT OUT?
Category Residential Property News
For many, property is the best investment choice because it has two components – income in terms of rental, and capital growth. Sometimes those two elements move in the same direction…but if they don’t, one can essentially help out the other to provide that total return. So, if the capital growth is flat or even down, you can still get your rental from it, and it’ll help you bide your time until capital growth arrives.
Capital growth is the factor which everybody loves to talk about, but I’m a firm believer in the value of that monthly income – it’s a significant factor in an investment of this nature. It’s what protects your property when the market is tougher and capital growth is lower than you’d like. It also allows you, if you’ve decided to sell that asset and it’s not selling, to opt for the default setting: “Rent it out. You don’t have to sell, bide your time, put in a tenant for a couple of years, and wait for the market to improve. Use the income as your return, and wait for that capital growth to come.’
That’s the angle behind property, and it’s why people like it so much as an investment. It’s not as up and down as an investment which doesn’t have the income component to it. If property was purely about capital growth, you’d see wilder swings, bigger booms and busts…but the income side is the stabilising factor. As investors, we don’t like it when our investments go down…that’s why so many people are more comfortable with property as investment – stock markets can go down as much as 50 percent (as it did in 2008/9), and while property can be under pressure, it’s very unlikely to go down by that. On the flipside, yes, the stock market can go up 50 percent, while property rarely does…but as an investment, the less violent swings provide a more balanced investment with which people are more comfortable. The rental income is a shock absorber to the market, both sides - almost a floor and ceiling effect.
In a market such as we’re in, if your investment property isn’t selling – and you don’t need to sell – rent it out. You’ll be getting your return, your investment is secure…just ride it out. Property is cyclical – the right time will come.
Author: Anne Schauffer