Investment is one of the important things you must do, one of which is property investment. Of all types of investments, property and stocks are components that have large profits.
Investment is commonly defined as placing money or valuable assets in an instrument in the form of objects, institutions, or other parties.
The party that invests their money is called an investor. Investors will get profits from their investment results in the future after a certain period of time.
In investing, investors need to choose and research the right investment instrument first. The right investment instrument that matches the risk profile is very useful so that the investment results will bring profits to investors.
In addition, investors can build an investment portfolio. Investment insight is useful in building a portfolio and implementing investment strategies on several different instruments.
In this article, we will discuss what property investment is. From investment tips for beginners to its types. Read the following explanation.
Key Takeaways:
- Property investment is part of a financial strategy that involves the purchase, ownership, and management of property.
- The purpose of investment in the property sector is to invest and make profits, especially in the long term.
- The benefit of property investment that you can feel is stability.
Property Investment
Property investment is the activity of buying, owning, renting, managing, or selling property with the aim of obtaining financial profits.
In this context, the property can include land, houses, apartments, commercial buildings, warehouses, factories, resorts, villas, boarding houses, and many more.
In general, property investment can have investment returns in two ways, namely from property value growth and rental income.
For property value growth, it means investors profit from reselling their property at a higher price.
Usually, investors can only sell their property at a higher price after years. The reason is, property prices have the potential to creep up over time due to a number of factors.
Benefits of Property Investment
Property investment provides benefits including:
Source of passive income in the form of rental income or sales.
Property prices tend to rise and are not fluctuative. Every year, property prices experience an average increase of 10%-20%.
Property prices will not be affected by inflation, in fact they always increase.
Freedom to determine the selling price or rental price of property according to the desired investment strategy.
Does not need to be monitored every day, only requires periodic maintenance to maintain its selling value.
Stability, especially when property values tend to increase over time. This can provide you with potential profits in the long term.
Portfolio diversification, as an investor you certainly want to invest in various instruments as an effective way to diversify your financial portfolio.
Having control over assets, you can have full control over your property, so management becomes more active.
Can determine prices as a property owner. You can determine the rental or sale price according to your wishes. However, you still need to know the market price to find out the price that buyers can afford.
Property Investment Risks
Requires Large Capital
When you want to make a property investment, whether buying a house, land or other types of property, of course you need capital.
Unlike other types of investments that you can adjust to your financial condition, such as mutual funds, property investment requires you to have a fairly strong financial condition.
The reason is, in buying a house, land, or other property, you need relatively large capital. The high cost of purchasing this property is very dependent on the environmental conditions you want to choose.
If the property area has rapid environmental development, then the higher the property investment capital you need to spend.
Takes Time That Is Not Fast
Perhaps buying used property does not take quite a long time. Nevertheless, you need to prepare up to 1 month to finalize all needs in acquiring your new property investment.
However, if you want to start property investment, it would be better if you buy a new house in an area or housing that is being built.
In that case, you need quite a long time. The process of building a house in a housing complex generally takes more than 2 years.
Nevertheless, usually the capital needed to buy property investment with houses that are still in the development period is smaller compared to buying used property.
Must Be Monitored Frequently
When you own a property, of course you need to maintain the house or property building as one way to maintain the value of the property investment you own.
In maintaining property investment, you need a considerable cost. The maintenance referred to here is not just arranging the garden or cleaning the entire house.
However, you also need a budget for renovating your property. This maintenance cost is indeed not small, but the expenses you incur in maintaining your property investment so that it can still generate significant profits.
Property Has a Lifespan
Unlike other investments, such as mutual funds that do not have an age, property investment has quite an influence on the time and age of the building.
Building age depreciation does not occur in the near future. However, if the age of your property investment is already over 20 to 40 years, it will affect the value of the assets you own.
Compared to younger property assets. In making property investments, time has a quite crucial role in bringing profits to the investment you make.
Natural Disaster Risk
As a tangible investment, property investment has a high risk of damage. Various natural disasters such as earthquakes, landslides, tsunamis, and others can destroy your property in an instant. However, you can minimize losses with insurance.
Low Liquidity
Property is not always easy to sell, and its liquidity is lower compared to some other types of investments.
Types of Property Investment
1. Residential Property
Residential property includes several types of properties that are common and involve you as a direct owner, such as houses, apartments, townhouses or condominiums.
If you invest in residential property, you can have more control over your investment assets. However, you are also required to be more active in maintaining the unit.
By investing in this type, you can get income from monthly rental money, or when you resell it at a higher price.
When you want to invest in this field, you need to choose property in a strategic location, close to public facilities, easily accessible by public transportation, and there is potential for economic growth. This can attract many interested parties to rent or buy your assets.
2. Commercial Property
Just like renting out residential property, you can get passive income every month by renting out various types of property used for business purposes and business activities, such as office buildings, shops, shopping centers, and others.
Commercial property allows you to get higher income compared to residential property.
However, if you decide to take investment in this field, then you must also be prepared with greater risks that may occur, such as market price changes, changes in government regulations, and natural disaster risks.
3. Mixed-Use Property
As the name suggests, mixed-use property is an investment in the property sector that combines residential and commercial. Examples are shophouses for business activities, boarding houses, or rental houses.
Property investment in this field is quite attractive because it provides flexibility for tenants and maximizes your income at one time.
What must be considered when wanting to invest in this property field is that you need to consider the flexibility of property use in order to adjust to future market needs.
You also need to calculate the maintenance and property management costs so that the property remains well maintained and cared for.
Tips for Starting Property Investment for Beginners
If you are a beginner to invest, here are some tips that have been compiled from the OJK page. Read the following explanation.
Preparing Investment Funds
The first way that needs to be done is to prepare investment funds and other funds needed. It is not a public secret that capital for investment is not small. Here are some costs that need to be prepared before investing in the property sector:
Down Payment Installments Insurance costs Notary fees Property tax
Choose a Strategic Property Location
Property location is a crucial thing that must be determined before you buy property or start investing. Location will affect the interest of potential users, and affect the selling-buying-renting price of property.
Property located in a strategic location has a higher selling value than property located on the edge of the city. Choose property located in a strategic location, easily accessible, and close to the center of activity.
Check Property Market Prices
Researching property market prices needs to be done before you decide to buy a property. This aims so that you get the best price according to the property market price in your area.
Usually, property market prices differ depending on the area and location of the property. Property market price research can be done online through several property provider platforms or asking directly to property agents in your area.
Choose a Trusted Developer
If you plan to buy property using the services of a developer, then you must be smart in choosing a trusted developer so as not to be trapped by fake entities.
Research the reputation and performance of developers in the market online or directly. Make sure the performance of the developer you will choose is good and can be trusted.
Home Ownership Credit (KPR) Approval
KPR approval is usually used to ease house payments, so many people try to get KPR approval.
KPR is one of the factors that makes it easier for novice investors when starting property investment.
Choose Tenor According to Financial Capability
When applying for KPR, the bank will offer several tenor options that you can choose according to your financial ability. The tenor offered usually ranges from 5 years to 10 years. Choose a tenor that suits your financial profile and available funds.
Adequate Facilities
After checking market prices, you must also know what facilities are provided by the developer. Adequate facilities will also increase property selling prices. Pay attention to the availability of internal and external facilities.
Internal facilities include places of worship, sports arenas, play areas and infrastructure such as housing gates.
While external facilities are facilities around the housing such as office centers, schools, hospitals and shopping centers. This is very important to be considered by you who are just starting to make property investments.
Land Purchase Certificate
Another thing that must be considered when making property investments is ensuring that the land certificate issued by the developer is legally valid.
As a novice investor, you must be observant in choosing housing units as property investments. You can ask about this through the notary who handles the land deed.
These documents will determine the status of the plot of land you own and the entire housing plot.
Preparing Additional Funds
When conducting property buying and selling transactions, you must prepare extra funds because it is possible that there will be additional costs that must be borne in the property investment purchase process.
Unit Handover Time
After all the steps to buy a house you have gone through, next make sure the handover time of the house or other property you bought.
Do not let there be delays that will harm you in the future. Do not let your main goal of property investment actually be detrimental.
How to Invest in Property
Rental System Property Investment
The most common way to get passive income from property investment is to rent out the property you own.
Investors can choose between renting out houses, apartments, or commercial property. Choosing a strategic location and a good understanding of the rental market are key to success in this strategy.
Property Flipping Investment
For those of you who are still unfamiliar with this term, property flipping investment is a property investment strategy by purchasing property at a low price, repairing or renovating, and reselling at a higher price.
Flipping can provide instant profits, but requires deep understanding of the market and project management skills.
Online Property Investment
In today's digital era, you can also make property investments online. Through various ways in online real estate, investors can participate in property ownership with more affordable capital. Some options in online property investment are:
- Property equity crowdfunding: Crowdfunding platforms allow you to buy ownership and invest together with other investors with affordable investment amounts.
- P2P lending property investment: With this platform, you can lend funds to property developers and get profitable fund returns.
- Buying property issuer shares: You can buy shares of property companies listed on the stock exchange, so indirectly, you are also involved in property investment activities.
Realize Property Investment with BTN
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Equipped with a variety of products and services, BTN can help you and your family to complete financial needs. Want to know more? Immediately visit our website to get complete information.
