An investment property, according to Investopedia, is any real estate property bought for the purpose of getting a return on investment (ROI) by selling the property or renting it out. People often purchase investment properties to earn more income or reduce their property tax. If you took an investment loan to buy an investment property in Thailand, the accompanying interest will usually be tax-deductible. You can pay a cheaper tax or make a tax claim.
Investment property offers a number of benefits to both first-time home buyers and experienced property owners. Instead of a regular home loan, first-time home buyers are encouraged to opt for an investment loan. Aside from being more convenient, investment loans have a higher borrowing power that ordinary mortgage.
From a lender’s point of view, however, investment loans have a higher risk than mortgage loans. Banks will sometimes find it hard to sell your investment property because of tenants refusing to evacuate the property. To avoid payment delays, banks impose strict loan policies while lenders only accommodate loans with a low loan-to-value ratio (LVR). In rare instances, you may come across lenders offering 95 per cent LVR.
Why Purchase an Investment Property?
- In a stable property market setting, an investment property can give you a fixed return on investment.
- In the case of rental homes, you can generate regular income through regular rental payment from your tenants. If your rental income exceeds your mortgage repayment, you do not have to worry about extra funds. You can also use your surplus funds to maintain your property instead.
- Should your investment property sit in an accessible location, its value will increase and you earn more profit from it.
- An investment property allows you to use the existing equity of your property to buy more investment properties or secure another loan.
What are the Cons of Purchasing an Investment Property?
- At the initial stage, an investment property can be very costly.
- You may not be able to sell or rent out the property right away. If you have a financial problem that requires an immediate solution, you need to sell your property quickly at a higher price. If your property is located in a densely populated area where a lot of condo or apartment buildings operate, your property may stay in the market for a long time before you find a buyer or a tenant.
- While waiting for your property to sell, you may have to cover all accompanying expenses – from property maintenance to membership fees to mortgage repayments.
- Tenants moving out after completing the contract is only a cause for concern. Finding new tenants can take some time and you will earn from your property during the vacuum period.
- Property values are volatile and dependent on market conditions. They may increase when the Thailand property market is stable. In the event of a financial crisis, most investors who have allocated a great portion of their funds into purchasing an investment property face difficulties when they could not sell their property or are forced to sell it at a lower price.
This post was created with our nice and easy submission form. Create your post!