Is Property Investment Still A Viable Choice For Securing Your Financial Future?

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In the halcyon days of the mid-00s, property investment was the choice for families looking to secure their financial future. The concept was so simple: you buy a property, likely make improvements to it, and then either sell it on at a profit - which became known as property flipping - or rent it out to generate a consistent income.

The wonderful thing about property investment was that it worked. The market was rising, and people were able to make a profit even without making any improvements to the house or finding a tenant; they could sit back, wait for prices to rise, and sell on at a substantial profit. Those who did choose to flip or rent their property out fared even better, and many families found the financial security they had always craved was suddenly accessible and simple thanks to the world of property.

Then the financial crash happened
The financial crash of 2007/8 took the wind from the sails of the property investment dream. The market crash, mortgage providers became more hesitant to lend, and it seemed the bubble had very much burst. A financial activity that had become so commonplace it was depicted on TV shows - Modern Family is one example of a show that had a property flipping storyline - somewhat fell by the wayside, as families had to focus on financial security in the present rather than looking to their future.

It’s now been ten years since the financial crash, and while property investment has never quite reached the giddy heights of the pre-crash days, it’s still one of the most commonly suggested methods of investing in future financial security. There is, however, one big question that lingers: is it still worth it?

Was the property investment craze a bubble?

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Let’s take the opportunity to take a step back and examine the property investment craze for what it was - something akin to the most dreaded of financial situations: a bubble. 

Bubbles develop when a small group of people, usually investors, find a way to make money, and they tell others about their success in the area. This leads others to jump aboard and try it for themselves. Then there’s the third wave; people who have heard the investment opportunity is producing results, and decide to give it a go… perhaps not always with as much research behind them as one would hope. The bubble expands, more and more people join, and then - pop! The market becomes so saturated, so over-invested, it can’t sustain itself. 

Property investment did reach “bubble” levels before the financial crash. It was depicted as incredibly easy, and plenty of people bought into the concept, only to find themselves losing out when the market crashed. Since the crash happened, many families have written off property investment, seeing it as part of an unsustainable bubble - but this isn’t entirely fair. 

Yes, the property investment scene did begin to resemble a bubble, but it wasn’t a true bubble - because the fundamental principles behind it are sound. True bubbles tend to revolve around an uncontrollable desire for a single product; the Dutch tulip bubble is one of the most famous examples of an unsustainable growth that eventually collapsed in on itself. 
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Tulips, however, are not property - people will always need to live in homes, thus the property investment market was never quite a bubble. Was it overinflated, and did people who didn’t quite understand it get involved? Absolutely, but the core principle behind it made sense. Property investment was more of a victim of a broader financial crash rather than a bubble that collapsed under its own weight. 

So we can conclude that property investment is not inherently dangerous, and is based on simple rules of supply and demand. Property investment made sense in 1950, in 1990, in 2010, and it still makes sense today - the craze has died down, but it’s still a good idea for those looking for a route to financial security.

Assessing the current housing market
Property investment requires good background knowledge of the current housing market, but this is where we encounter our second obstacle to overcome when seeking to ascertain the value property investment offers: no one really knows what’s going on with the housing market.

At present, the US housing market is rather positive… but it is also plagued by predictions of doom in the future. However, to put these predictions into perspective, experts have been predicting a crash for many years, but it has yet to arrive… but they could also be right this time…

It’s confusing. So, let’s say this: the housing market is currently believed to be slightly overinflated and due a correction at some point. This may not happen for many years, or it might happen tomorrow - no one really knows. This means that if you’re considering property investment, you need to keep three critical factors in mind:

• Don’t invest beyond your means.
• Don’t invest everything you have saved for the future.
• Getting a good deal on any property you purchase is incredibly important; if you can’t achieve this, and the market corrects, you could find yourself in negative equity.

When assessing the housing market in terms of property investment, it’s also important to look at demand. In this field, the US market seems healthy: demand has been consistently high over recent years, so those looking to flip a property should have plenty of buyers available to them. There’s also good news if you wish to buy a house to rent it out: renting is becoming more common, so finding tenants should be relatively simple.

Overall, the picture of the US housing market is fairly conducive to those who wish to invest in property. Yes, there’s some shakiness around the sustainability of the market, but this is nothing new - and can be somewhat mitigated by sensible investment choices.

Considering the opportunities for overseas property investment

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One aspect of property investment that is often overlooked is the potential in the overseas market. Many investors choose this route over investing domestically in the hopes of capturing a rising market and benefitting from the strength of the US dollar, and it’s well worth considering.

If you want to contemplate investing overseas, then there are a few pointers to keep in mind:

• Overseas property investment is particularly worth considering if you focus on tourist-friendly areas. Services such as Airbnb can be a great way of securing a continual income from a property in a flexible, dynamic way - and you’ll even be able to use the property as a holiday home yourself, too.
• It’s preferable to look for countries that are Anglophone, either as a first language - Australia, New Zealand, the UK - or as a second common language - Singapore, India, China - to ensure you can manage the purchasing process without the need for expensive translation services.
• You will also need to spend time researching the housing market in your chosen country, as all countries can experience turbulence and even crashes that can disrupt your financial planning.
• It’s helpful if you know a little about the country before you choose to invest in property there. While you can buy remotely - and many countries have specialist agencies to help facilitate this - it’s also preferable to visit an area, if not an individual property, before choosing to invest there.
• Investing overseas is often seen as the “cheap” option, but keep in mind you will still be subject to taxation and other fees and expenses, even if the property price itself is lower than it would be in the US. It’s important to take the time to research areas such as stamp duty and other forms of taxation in your chosen country; although these additional rates are unlikely to be prohibitive, they do need to be a factor in your calculations.

So, is property investment still a viable choice?

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While the heady days of the property investment craze have cooled over recent years, it would seem that property investment is still a good choice - with a few caveats. As with most forms of long-term investment, your willingness to research is a key factor; without research, property investment can be an expensive mistake, but done correctly, it can be hugely beneficial.

The second most important caveat is the need to engage with property investment with complete honesty, acknowledging that there is a chance that the market will crash. While a market crash might not necessarily ruin your investment, it can impact the profits you can generate or the rental yield you are able to obtain - problems that take a long time to remedy. As a result, it’s best to start small, spending far less than you can afford - if things go well, you can sell and move on to a bigger property; if they don’t, at least you’re somewhat insulated by the lower investment amount.

However, if you can keep the two factors above in mind, then yes, property investment is still a realistic choice for those seeking a strong financial future for their families.

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By Iconic Chica Mag Contributors