There is a specific degree of gambling associated with investing in the property market. However, its effect depends on the individual investor’s level of risk tolerance. Some real estate investors are willing to take more risk as long as the payoff is worth it. On the other hand, others avoid investments that are too risky. Taking a gamble on property investment is simply risking your investment capital with the hopes of making a future profit. Read on to find out more.
The Buy-to-Let Property Market
The Buy-to-Let Property Market is simply a type of property investment that involves purchasing a property for the sole purpose to rent it out. Typically, these properties are residential, but they consist of both hotel room and student property investments. To make profits on a Buy-to-Let, you can either earn from your rental income or increase the financial value of the property over a period of time.
To purchase a Buy-to-Let property, you must have a Buy-to-Let mortgage. This type of mortgage is specially designed for properties that are to be rented. Although this mortgage is similar to the ordinary mortgage, there are some important differences. The first attribute that differentiates the Buy-to-Let mortgage is that they are interest-only mortgages. This implies that your monthly payments will just pay off the interest charged on the loan at first. Although your monthly payments will be less, you must be ready to either sell the house, pay off the loan, or remortgage the property at the end of your mortgage period.
Another notable difference is that the mortgage amount you can apply for depends on the rent amount you plan to charge. The last difference is the amount of your initial deposit. Buy-to-let mortgages need larger deposits than ordinary mortgages.
Betting Against the Housing Market
Betting against the Housing Market refers to investing in a way that allows you to make profit if the stock market or certain security loses value. This implies that you get your investment returns when the value of the stock market falls. However, this also means that you will lose money if the stock market rises.
A common way you can bet against the Stock Market is by a method called Short Selling. This method entails borrowing shares from a person, selling those shares immediately, and promising to return the shares to your borrower at a future date. If the value of shares decreases between the period you sold the shares and when you have to return them, you can purchase the shares at a lower price and keep any extras. However, if the value of the shares increases, you will have to pay for the extra cost, thereby losing money.
Spread Betting on Property Prices
Spread Betting is different from the conventional view on betting. In this type of betting, you bet your money to support your belief that a particular market will move in a specific direction over a short or long period of time. When you participate in spread betting in the property market, you can use your money to predict and support the future price movements in the Property Market.
Essentially, Spread Betting on property prices allows you to gain exposure to a market without buying or committing yourself to any particular property. It is a good option for investors who are not willing to stake a considerable amount of cash bets upfront. Here, you have to predict accurately if the price of a certain property will rise or fall over a certain period of time. If you guess right, you win big on your bet and if you bet wrong, you can lose a lot of money.
There are also no sure guarantees of the outcome. Investors make a stake per point of the property index movement. One notable attribute of Spread Betting is that its rules are not as stringent as purchasing a house. All your profits are tax-free, and you do not need the interference of a solicitor or a stamp duty.
Conclusion: The Forms of Gambling in the Property Market
There are primarily three forms of gambling in the Property Market. Like any other type of investment, each of them involves a level of risk. In the Buy-to-Let Property Market, you purchase a property for the purpose of renting it out to people. When you bet against the Housing Market, you only make profits when the Market loses value. This means that you lose money if the market appreciates in value. With Spread Betting on Property Prices, you predict the direction of the price of a property in the market without accepting the underlying security.