Dilleen Property Group 2022

Money does not grow in value when it is left in the bank, hence many people look into investing. When we think of investing - share investment and property investment may be the first two investment types we think of. Depending on the amount of research made, both investment types can potentially be money makers or money pits. So how do we determine which investment type is less risky?

There are several factors to determine this:

1. Fluctuation

Stocks are always fluctuating as the stock market is constantly changing. It is also prone to market, economic and inflationary risks. Contrastingly, purchasing real estate means you are buying land. Unlike stocks, which constantly get released, it is impossible to generate more land, hence property values tend to be less volatile compared to stocks. Assets are considered less risky if they remain relatively stable over time.

2. Lending

It is uncommon to get bank loans to purchase shares, occasionally lenders may lend a small loan-to-value ratio, however, it is difficult to get large loans to invest in stocks. Contrastingly, lenders are willing to lend up to 95% of a property’s value for an individual to purchase a property. This is because lenders see properties as better assets to hold as they are more stable and secure compared to stocks. It is quite common for lenders to lend 90% - 95% for property investment.

3. Leverage

It is possible to make money in the long term with shares, however, there is no leverage associated with share investments. In contrast, one of the biggest advantages of purchasing properties is the leverage component. This means if you put a 10% deposit for a property valued at $1 million, you would only have to pay 100K to own the property. If the property doubles in value after 15 years, the property would then be worth $2 million while you have only used 100K to purchase it. However, if you put 100K into stocks, there is no leverage, if the shares double in value in 15 years time, you will only have 200K. Furthermore, properties provide a consistent rental income and this amount increases along with your property value over time, essentially providing more monetary benefits compared to shares.

If you require assistance or have an inquiry about purchasing investment properties or building your own property portfolio, you can contact us here to learn more about our investment strategy.

Disclaimer: This is not intended as legal, financial, or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature, you should seek advice from a qualified and registered legal practitioner or financial or investment adviser.