Many people who borrow to invest in property underestimate the risk involved. Before you invest, you should ask yourself the following questions: How will I be fixed if interest rates rise from 5% to 7%? How will I be fixed if interest rates rise from 5% to 10%? How will I be fixed if there is a crash in the rental market and my rental income drops? How will I be fixed if I can't find a tenant and the property is vacant for 3 months? How will I be fixed if the Government messes about with the tax situation? How will I be fixed if property prices fall in the short or medium term? While these outcomes are unlikely, investors must be able to cope with them if they do happen. If you borrow heavily to invest in property, then there is a very good chance that the rental income will not cover the mortgage repayments and other costs. So it is very important that you can make up the difference from your salary or other income. You should only borrow to invest in property if your other income is fairly secure i.e. you are not in any real danger of losing your job. If you already have a big mortgage on your home, you would be foolish to borrow 100% of the price of an investment property. If interest rates rise, you will have great difficulty in meeting your repayments. The potential return is just not worth the risk involved. On the other hand, if you have paid off the mortgage on your home, borrowing 100% to invest in property is probably a good idea. If interest rates rise, your rental income may not cover your mortgage repayments, but you can make up the difference from your other income. Likewise, if you have difficulty renting your property, you won't be forced to sell. A short term fall in property prices is not a problem for the long term property investor. However, if you are losing money on the investment and you are forced to sell, then a fall in house prices would be a serious problem. SOME OTHER ISSUES TO CONSIDER BEFORE INVESTING IN PROPERTY If you already have a home, you have a significant exposure to the property market. Buying another property increases this exposure. Investing in shares diversifies your investments. If you are not borrowing to invest, you are better off investing in shares than property. The killer advantage of property is that you get a tax write-off for the mortgage interest, which you don't get if you borrow to invest in shares.