Before Making
the Investment
The growth potential of property investment plus its ability
to give you rental income is appealing. But remember,
a property is a big ticket leveraged investment that can
both multiply your profits-or multiply your losses. Do
your sums carefully to ensure that an investment in property
will not adversely affect your financial fitness.
Let us look at some critical factors that you have
to consider before making the investment.
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Your Debt-Asset
Servicing Ratio and Debt Asset Ratio |
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Your Cashflow |
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Your Liquidity Needs |
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Measuring the Benefits and
Costs |
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Your Investment Strategy |
Property is an important part of an investment portfolio
for an investor seeking long term growth. However, evaluating
an investment opportunity in isolation may lead you to
become overly7-exposed to property. This can affect your
wealth adversely during of large fluctuations in the property
market.
To attain the best possible investment structure for
yourself, ensure that your portfolio has the full range
of asset classes i.e. cash, bonds, property and equity
in appropriate proportion. The mix and proportion of
asset classes in your investment portfolio is critical
to your wealth creation plan, because it determines
the amount of risk you are undertaking. The appropriate
portfolio mix for you will depend on:
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Your financial
and emotional ability to handle the risk of temporary
declines in the market |
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Your income and its level
of stability |
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Your liquidity requirements |
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Your investment objective |
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Your investment time frame |
Your decision on the proportion of each asset class
in your portfolio will account for over 90%* of the
variation in your investment returns. This astonishing
finding highlights the importance of a carefully constructed
investment portfolio based on your individual investment
objectives, rather than choosing investments based on
the preconceptions of growth.
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