Tuesday, December 29, 2009

Property Investment

When you visit a Bank and intend to borrow a money, you will asked by the Bank what the purpose of the money’s exertion. If you answer that the money will used to buy a stock, you will be ignored. But, when you say that the money will be used to buy property, the Bank willingly listening further and offers relevant products. 

Property is the asset that embodies which has value and becomes the credible investment instrument so the Bank willing to gives a loan evens for long time, more than 15 years.
The advantage of property investment not only act as the inflation hedging investment but also as the very good portfolio diversification. Theoretically, the property value will follow the inflation rate so if this property value increase more than the inflation rate, there is the probability for cost decline in the future.
Tips that often given on the property investment is always pay attention to three ’L’ which are location, location and location. CFA’s finance practitioner , Ferdinand Sadeli said that location often so-called as the successful key of property investment. There is common advise that often to said : you can change the appearance but you can’t change the location. Here some points that you have to pay attention on the property investment according Ferdinand :
1. Property characteristic
Property investment has the four characteristic. First, unmovable, like the previous advice, the property can’t move so the location has the important rule. Second, can’t split. The property is one unity. Third, unique. There are no one property that similar to other on the market. If they on the same street, perhaps one is heading to east, the other is heading to west. Fourth, not liquid. Differs with the stock or obligation which relative liquid, when you want to sell property investment, you will need more time.
2. Understanding risk return
The success key of property investment not only counting on location, but understand the risk return. Generally, property investment with the low risk return is the property which has a connection with residential likes house or apartment.
Then the investment with the average risk return is the commercial properties like house-store, office area, mall, and warehouse. And the investment with the high risk return is land.
Residential property will always needed by everyone as habitation so the next analyses are on the access, traveled distance, facilities (like school, hospital, market etc), environment, and security. These factors can be consideration before the people choose the residential as the habitation.


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