To try and offer a balanced answer to this question, let’s take a close look at the risks and returns associated with developing or investing in a property:
– Property Development
Many of those who enter the world of property development do so because it’s a good way to grow their capital and create value. Property development is also a good way for you to preserve your wealth in the long-term.
The majority of the gains you’ll experience are likely to be a result of a capital value increase. Developments can offer a lot more value than investments in terms of larger returns and value creation. However, you need to be knowledgeable about the development of properties and you’ll need quite a bit of capital to hand too.
There tends to be a greater risk when it comes to developing properties as opposed to investing in them where you may be able to share the risk and invest less capital, but if you know what the risks are and you’re prepared to take them you could see some good returns from development projects.
– Property Investment
Property investment can be hugely attractive for those who would like their money to work well for them. Property investment can generate large returns, more so than perhaps some more traditional types of investing or saving.
When someone invests in property they either do so for the rental gains or for capital growth. In the UK, property prices tend to double every decade, and they have continued to do so over the last 6 decades. There aren’t many other types of investment that have the same potential, and this is why investing in properties can be such an attractive thing.
If you invest in a property you’re likely to see that it has a huge advantage compared to a lot of other types of investment. If, for example, the growth in the property market is not quite as high as the growth rates in some stocks on the stock market you can use positive gearing to your advantage. Positive gearing involves you receiving more money through rent from all of your tenants than you pay on mortgage repayments, property maintenance and interest. Positive gearing can occur when there is a high demand for property when interest rates are low.