Property as an investment

The lesson in full

For many families, a home is the biggest purchase of their lives. As an investment, property can earn rent and rise in value, but it's harder work than it looks.
It needs a big amount upfront, usually with a long home loan. Borrowing magnifies the result, good or bad.
Rental yield = yearly rent ÷ price. A flat costing 200,000 that rents for 800 a month earns 9,600 a year: a 4.8% gross yield, before costs.
Then subtract the extras: taxes, notary and agent fees, repairs, insurance and empty months without tenants. Net yields are often 1–2 points lower.
It isn't liquid: selling can take months, and you can't sell one room when you need cash.
Common mistake
Mistake: “property prices never fall.” After 2007, home prices fell roughly 30% in both Spain and the US, and many buyers owed more than their homes were worth.
Key takeaway
Count every cost, compare the net rental yield with safe deposit and bond rates, and never buy with money you might need quickly.

Property is usually... Not very liquidFinding a buyer and completing a sale often takes months.
Extra costs of property include... Taxes, fees and maintenanceThese costs eat into the rental yield every year.
Before buying to rent out, compare the rental yield with... Deposit and bond ratesIf a safe deposit pays about the same, the extra effort and risk may not be worth it.
A flat costs 100,000 and rents for 500 a month. Its gross yield is... 6%500 × 12 = 6,000 a year; 6,000 ÷ 100,000 = 6%.